Goldman Sachs Superday Practice Test

In the Gordon growth model, dividends are assumed to grow at a constant rate forever, and the discount rate used to value those dividends must be larger than that growth rate. This ensures the present value series converges to a finite price, with P0 = D1 / (r − g). If the growth rate were not below the discount rate (g ≥ r), the denominator would be zero or negative, producing infinite or nonsensical results. So the key assumption is that growth is perpetual and strictly below the discount rate.