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Gordon dividend model

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(Querist)
05 October 2011 Gordon Dividend formula is

Po=D1/Ke-g

Where
D1=DPS Next Year
Ke=Cost of Equity
g=Growth
Po=Current market price


I want to Know Why We deduct growth from Ke while calculatinh Market Price???? Should not it be added??????
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CMA Ashutosh Kumar Gupta

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CMA Ashutosh Kumar Gupta (Expert)
07 October 2011 simply because you are discounting the future value-growth in today's terms where Ke is greater than g

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