Dividend Discount Model Calculator
Use the Dividend Discount Model Calculator with your own values for Calculation mode, Dividend per period, Next dividend, Required return, Growth rate, Dividend cash flows, Terminal value, and Market price. It reports Intrinsic value, Value difference, and Premium or discount, shows the formula and worked example, and does not fetch live market or account data.
Learn the method: step-by-step examples and practice ↓
Calculate, then understand
Step-by-step learning lab
Identify whose cash flow this is and when it occurs. Enter the given values, then follow the calculation as each number changes.
Constant dividends: value today
What is one share worth if it pays the same dividend forever?
When to use it and why it works
A shareholder pays once today and receives a dividend at each later period-end. Discounting that unchanged, perpetual cash stream gives D ÷ k. Use it to study a fixed-dividend perpetuity.
V = D / k
Work through an example
A share pays 4 each year forever and the required annual return is 8%. What is its model value?
Read this example’s explanation
4 ÷ 0.08 = 50. A cost of 50 corresponds to an annual dividend of 4, or 8%.
Your calculated answer
- Model value per share today V
- 50
Follow each step
Convert the required return to a decimal
8 ÷ 100 = 0.08Divide the periodic dividend by the required return
4 ÷ 0.08 = 50
Intermediate calculations retain precision; displayed values are rounded. Follow the precision requested by your question.
What the result means
V is the amount paid today that corresponds to the required periodic return under these assumptions. A higher k gives the same perpetual dividend a lower present value.
Mistakes to watch for
- Payments begin at the next period-end and remain constant forever. Discount finite dividends individually. The required return must be positive.
- Dividends belong to shareholders, so discount them at the required equity return. Do not directly discount per-share dividends using the firm’s WACC.
- This valuation depends on the assumed dividends and rates. Dividends can be cut, and a model value need not become a traded price.
Try another question on your own
Change the annual dividend to 6 and the required return to 12%. Predict the value before calculating.
Set up the formula first. Answers rounded to two decimals are accepted; use six decimals for absolute values below 0.01. For percentages, enter the number before the percent sign.
How to use this calculator
Enter Calculation mode, Dividend per period, Next dividend, Required return, Growth rate, Dividend cash flows, Terminal value, and Market price.
Review the model boundary before calculating: A constant-growth DDM requires the required return to exceed the perpetual growth rate.
Read Intrinsic value, Value difference, and Premium or discount, then compare the result with the cited source and governing product terms.
Formula
Formula used: V₀ = D / k; Vg = D₁ / (k − g); V = Σ Dₜ / (1 + k)^t + TV / (1 + k)^n. Percentages are converted to decimals before calculation.
Worked example
Example: with Next dividend = 2.00, Required return = 10%, and Growth rate = 4%, the calculated Intrinsic value is 33.33.
Assumptions and limits
- A constant-growth DDM requires the required return to exceed the perpetual growth rate.
- Dividends can be reduced, suspended, or changed and are not guaranteed cash flows.
- This educational estimate is not investment, tax, accounting, or legal advice.
Sources
- New York University Stern School of Business: Valuation ResourcesDividend, cash-flow, and relative valuation methods and their assumptions. Reviewed 2026-08-24.
- OpenStax, Rice University: Principles of Finance 2e — Dividend Discount ModelsOfficial formula or method source used by this calculator. Reviewed 2026-08-24.
- Aswath Damodaran, New York University Stern School of Business: The Dividend Discount ModelOfficial formula or method source used by this calculator. Reviewed 2026-08-24.
- OpenStax, Rice University: Principles of Finance 2e — Applications of Time Value of Money in FinanceOfficial formula or method source used by this calculator. Reviewed 2026-08-24.
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Verification
How this calculator is checked
Trust comes from reproducible evidence, not model confidence. You can inspect the formula, assumptions, worked example, and cited sources on this page.
- Versioned calculationFormula logic is kept separate from the interface and covered by automated registry and behavior checks.
- Cited evidenceSources linked for independent checking: 4.
- Transparent AI useAI may assist drafting or adversarial review. Agreement between models is not proof, and no human expert review is claimed unless a named reviewer is shown.
Frequently asked questions
How does the Dividend Discount Model Calculator work?
Formula used: V₀ = D / k; Vg = D₁ / (k − g); V = Σ Dₜ / (1 + k)^t + TV / (1 + k)^n. Percentages are converted to decimals before calculation.
What should I enter in the Dividend Discount Model Calculator?
Enter Calculation mode, Dividend per period, Next dividend, Required return, Growth rate, Dividend cash flows, Terminal value, and Market price using one consistent currency and time basis.
What should I verify before using the Dividend Discount Model Calculator result?
Verify these limits: A constant-growth DDM requires the required return to exceed the perpetual growth rate. Dividends can be reduced, suspended, or changed and are not guaranteed cash flows. This educational estimate is not investment, tax, accounting, or legal advice.
Last updated 2026-08-25 · zero-gordon-explicit-cashflows-v1 · content-2026-08-24 · Published by YunFanLabs