Dividend Growth Model (Gordon Growth)

The model breaks down if g ≥ r. In practice, no company can grow faster than the discount rate forever; use multi-stage DDM for high-growth stocks.

The required return is typically the cost of equity, estimated using CAPM: Rf + Beta × (Rm − Rf).

Use the Free Cash Flow to Equity (FCFE) model or a DCF approach instead of the dividend growth model.