“Wild” Swing in the Dow Jones? « Learning from Dogs


do the math. Using the constant dividend growth model, a very simplified model of the market value of equity, or Market Value = Current Dividend/(cost of equity capital – dividend growth rate), and assuming a long-term average cost of U.S. equity capital of 12% and average growth rate of 5%, we find that the opening level of 10868.12 = 760.77/(.12 -.05), and the closing level of 10520.32= 760.77/(.1223 -.05).

“Wild” Swing in the Dow Jones? « Learning from Dogs

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