Investment Opportunities and Gordons Stock Valuation Model-A Note

01/10/1985

Investment Opportunities and Gordons Stock Valuation Model-A Note

Ragunathan V and Srinivasan G

Working Papers

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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.

IIMA