Stage 2 of the Two Stage Growth Model
Use the Gordon Growth Model for this stage.Take the last above-average growth divident payment that you calculated from stage 1.Multiply by average growth rate to find next year’s dividend payment.Plug this payment into the Gordon Growth Model ( dividend payment / (RRR – growth rate) )The answer is still in FV; discount back to PV. Sum the PV of Stage 2 and the PV of Stage 1.