What is the formula used to calculate the intrinsic value of a stock according to the constant growth model in the chapter?

The formula used to calculate the intrinsic value of a stock according to the constant growth model is P0 = D1 / (rs - g), where P0 is the stock's intrinsic value, D1 is the expected dividend next year, rs is the required rate of return, and g is the growth rate of dividends.

This formula is derived from the Gordon growth model, which assumes that dividends will grow at a constant rate indefinitely. The intrinsic value is calculated by dividing the expected dividend by the difference between the required rate of return and the growth rate. This model is useful for valuing stocks that are expected to have stable growth in dividends over time.