D the stable growth stage value is most crucial, since it take the largest stake.
Ke = 10% ROE = 10% EPS = $1 DPR----------Div-------------g------------D(1+g)/(k-g) 95%----------.95----------.5%------------10.05 75%----------.75----------2.5%-----------10.25 50%----------.50----------5%-------------10.5 25%----------.25----------7.5%-----------10.75 5%-----------.05----------9.5%------------10.95 Ke = 10% ROE = 8% EPS = $1 DPR----------Div-------------g------------D(1+g)/(k-g) 95%----------.95----------.4%--------------9.94 75%----------.75----------2%---------------9.56 50%----------.50----------4%---------------8.67 25%----------.25----------6%---------------6.63 5%-----------.05----------7.6%-------------2.24 So even when Ke = ROE, a decrease in the DPR increases value. When Ke > ROE, it makes sense that a higher DPR = an increase in value.