The model called that determines the market value of a stock based on its next annual dividend, the dividend growth rate, and the applicable discount rate is a Gordon growth model. This is further explained below.
Generally, When valuing a company's shares, investors often utilize the Gordon growth model (GGM) since it assumes a steady increase in dividend payments in the future.
In conclusion, The Gordon growth model is used to calculate the fair market value of a company by factoring in the business's expected annual dividend, its dividend growth rate, and the current discount rate.
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