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DDM (Gordon growth model (Appropriate to use when (Pays dividend,…

- - - - Use multi-stage DDM
- - - - Prices decline
        
        Increased competiton
        
        Market saturation by product
      - Growth rate in earnings decreases
        to average economy growth rate
      - Profit margin decrease to overall economy level
      - Capital requirements low or decreasing
      - FCFE positive or increasing
      - ROE moves to r
      - Dividend payout ratio from zero to some positive number
    - - Linear decline from
        high-growth rate to
        long-term rate
    - - Abrupt decline from superabnormal growth to
        sustainable long-term growth
  - - - Profit margin high
      - Growth rate in earnings above normal
      - Capital requirements high
      - FCFE negative
      - ROE > r
      - Dividend payout ratio: low or zero
  - - - Earnings growth rate stable at long-term levels
      - Profit margin stable at long-term rate
      - Capital requirements stable at long-term rate
      - FCFE stable at long-term levels
      - ROE = r