01/10/1985
Investment Opportunities and Gordons Stock Valuation Model-A Note
Ragunathan V and Srinivasan G
Working Papers
The traditional stock valuation model incorporating growth opportunities, fails to recognise the investment opportunities constraint. As a result the conventional model fails to provide an optimum reinvestment ratio and instead provides merely a limit for the same. This note recognises the opportunities constraint explicitly and in the process provides an expression for optimal reinvestment ratio.