Abstract
Themost common valuation model is the dividend growth model. The growth rate is found by taking the product of the retention rate and the return on equity. What is less well understood are the basic assumptions of this model. In this paper, we demonstrate that the model makes strong assumptions regarding the financing mix of the firm. In addition, we discuss several methods suggested in the literature on estimating growth rates and analyze whether these approaches are consistent with the use of using a constant discountrate to evaluate the firm’s assets and equity.
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CITATION STYLE
Ivan E, B., Chen, H. Y., & Lee, C. F. (2015). Alternative methods for estimating firms growth rate. In Handbook of Financial Econometrics and Statistics (pp. 1293–1310). Springer New York. https://doi.org/10.1007/978-1-4614-7750-1_46
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