Gordon Growth Model
See: Growing Perpetuity. PV = C₁ / (r − g). The foundation under every DCF Terminal Value calculation and the entire Dividend Discount Model school of equity valuation. Named after economist Myron Gordon, who formalized the formula in 1956. Use cases: pricing utility stocks, mature dividend payers, infrastructure assets with stable cash flows. Where it breaks: growth stocks (g approaches r), companies with negative free cash flow, businesses where the perpetual-growth assumption is implausible (commodity plays, cyclicals). For those, use multi-stage DCF or comparable multiples.
Lessons that use this term
Related terms
Adjusted Cost Basis · Annuity · Capital Gains Distribution · Capitalized Interest · Cost Basis · Dividend Discount Model (DDM)
Open this term in the app → — no account needed; browse the full glossary while you research.