## Two Stage Dividend Discount Model

The two-stage model has an unstable initial growth rate, and can be either positive or negative. This initial phase lasts for a specified time and is followed by stable growth which lasts forever. The problem with this model is that the growth rate from the initial phase is assumed to change to the stable growth rate overnight.

## $$\frac{d[1+{g}_{1}]}{k-{g}_{1}}\{1-[\frac{1+{g}_{1}}{1+k}{]}^{n}\}+\frac{d[1+{g}_{1}{]}^{\mathrm{n}}[1+{g}_{2}]}{\frac{k-{g}_{2}}{[1+k{]}^{n}}}$$

Here,g1= Growth rate during high growth phase.g2= Growth in constant growth phase after n. n = Length of high growth phase.Assume g1<>k and g2< k,d=dividend for the next year.

ENTER THE VARIABLES TO BE USED IN THE FORMULA