The Golden Apple Tree: A Tale of the Dividend Discount Model (DDM)
In the prosperous town of Financia , there was an ancient golden apple tree standing in the center of the Royal Market. This tree was no ordinary tree—it bore magical apples that grew in value every year . The tree was owned by the wise old merchant, Master Dividen . One day, a young investor named Theo approached Master Dividen and asked, "Sir, I want to buy this tree, but how do I know what it’s worth?" Master Dividen smiled and said, "The value of this tree depends on the apples it will bear for you in the future. Let me explain." The Tree of Future Wealth (The Core Idea of DDM) 🌳 Master Dividen pointed to the tree and said: "Every year, the tree produces 10 golden apples, and I sell each for 1 gold coin. That’s 10 gold coins a year!" "But since it's a magical tree, the number of apples grows by 5% every year." "If you expect a fair return of 10% per year, how much should you pay for this tree today?" Theo scratched his head. ...