Gordon Model

Gordon model in original is an edited form of discounted cash flow model. Discounted cash flow model was a method of evaluating the value of stock or any business in online stock trades. This method was used to render solution for the difficult evaluation issues related to litigation, planning of tax and complicated business transaction in online stock trades. Gordon model was a name given after Myron J. Gordon who has presented this model first time in 1959. According the assumption of theory rate of return of any stock in online stock trades is constant which is represented with the letter "K" which is also considered as cost of equity of the company in online stock trades, it is also assumed that issued dividend of the company in online stock trades has current value denoted with "D" which grows constantly at the same rate denoted by "g". In the end price current can be calculated by summing the infinite series

After summing the infinite series we have,

In actual, P can be adjusted by using different factors one of them is size of the company in online stock trades.

k is expected return = yield + expected growth.
We have an expression,

D1 = D0(1 + g), so the Gordon's model becomes

Form the expression it can be observed that earnings growth is shown constant however, high growth rate can be maintained for longer period in online stock trades. It is valid for few years only in online stock trades after that only a sustained growth rate can be observed in online stock trades. This leads to the terminal case for discounted cash flow and Gordon model is used as a replacement in the terminal case.