Hey Guys,
I got confused on how the Justified Div yield formula is to be elaborated from the mother of all formula’s i.e P=D0(1+g)/r-g, can someone plz help me to get a good grip on below formula…
D0/P0 = r-g/1+g…(plz elaborate this formula)
Assume that g=0. The justified yield on a stock for the price paid is r, which is the required rate of return.
Now if the stock were to grow at a constant rate forever, then the justified dividend yield has to be smaller, or the present value of the stock must be larger when you include the present value of growth opportunity over the required yield r. So the growth rate in this case becomes your discount rate in the forumla D/P + g = r, which means dividend yield + growth = cost of equity, or income + captial = total return.
You can reverse the equation into P0/D0 = (1+g)/(r-g) if that makes more sense to you.
In the end, the GGM is a series of infinite summations of present values. So you have to understand that first to understand the integrated forms of the equation.
I wrote an article on justified ratios that may be of some help: http://financialexamhelp123.com/justified-ratios-price-multiples/
Got it…Thank you guys 
My pleasure.