The equity section sure goes through a heck of a lot of detail on discounting stuff using growth rates: Dividends, Free Cashflow or Residual Income. But what growth rates to use? Doing a recent question I was given EPS growth rate. Now I think that EPS growth should be the same a intrinsic growth rate (bxROE) given a stable payout ratio and D/E so my when question is: are there any time when I must __not__ use the intrinsic growth (=bROE) or do I __always__ need to find it and use it? Thank you
Depends on the information provided. If they give you a growth rate to use, use it. If not, then find it.
Related question : when is the growth rate for earnings the same as growth rate for dividends ?
it’s pretty much universal… or implied growth = (P * r - B * ROE)/(P-B)
my confusion comes from one question where they gave me growth of EPS, and and also gave my the required rate of return. Funny thing was r and g were exactly the same! “This can’t be!” I thought. The denominator will be zero! The sneaky solutions then go ahead and calculate the intrinsic g which was less than EPS g and with that calumniation the problem becomes much much easier!