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April 20th, 2019, 11:18 PM  #1 
Newbie Joined: Apr 2019 From: Denmark Posts: 1 Thanks: 0  Isolate discount rate
I use this dividend discount formula to calculate the fair value of dividend stocks: fv=(d*(1+gr))/(drgr) fv=fair value d=dividend gr=growth rate dr=discount rate But how do I isolate the discount rate (so I can insert the current stock price instead of the fair value and get an estimate of the expected return)? Thanks in advance! 
April 21st, 2019, 04:35 AM  #2 
Math Team Joined: Jul 2011 From: Texas Posts: 3,002 Thanks: 1587 
$fv = \dfrac{d(1+gr)}{drgr}$ $drgr = \dfrac{d(1+gr)}{fv}$ $dr = \dfrac{d(1+gr)}{fv} + gr$ 
April 21st, 2019, 10:47 AM  #3  
Math Team Joined: Oct 2011 From: Ottawa Ontario, Canada Posts: 14,597 Thanks: 1038  Quote:
Let u = d(1 + gr) Then your equation becomes: fv = u/(dr  gr) Solve for dr: fv(dr  gr) = u dr  gr = u/fv dr = u/fv + gr That'll result same as Skeeter's.  

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