Present value of future dividends formula
The larger the discount rate is, the bigger the reduction from future value to present value will be. Practical applications of theory. The dividend discount model. The On the one hand, we have the present value of future dividends. On the other hand, we have the PVGO. Using a formula. $$ V_0 = \frac{E_1}{r} + PVGO $$. This equation, which states that stock prices should equal a discounted present- value sum of expected future dividends, is usually known as the dividend- discount