SHORT ANSWER What are the assumptions of the Gordon Growth Model that relate to Net Operating...

Question

Question

SHORT ANSWER What are the assumptions of the Gordon Growth Model that relate to Net Operating Income (NOI) and Net Operating

Answer 1

Answer #1

Assumptions of Gordon Growth Model:

1) Firm is an All Equity Firm

2) Firm uses only Retained Earnings to finance its investments

3) Rate of Return, Cost of Equity, Retention Ratio and Growth Rate are constant

4) Cost of Equity is greater than Growth Rate

5) Growth Rate = Retention Ratio*Return on Equity

6) Firm has a perpetual life

7) There are no taxes

Answer 2

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