I will preface this to say that yes of course I researched my face off for hours. And while the equation itself is explained (give me numbers and I can do it) all over the internet, the WHY of what is included is not clicking.
WHY on the bottom part of the equation am I subtracting the growth rate from the expected rate of return? The words “that is the effective discounting factor” mean nothing to me. I understand the “time value of money” concept (and suspect it has something to do with this); I do not understand how these two *particular* factors are the ones you need (to be divided by dividend price of course) to help determine the stock’s appropriate pricing.
What do those two amounts have to do with anything? Please help!
Edit: By explaining simply, I mean very very simply, like the link below, in an analogy, not using any financial terms. I am not a finance student.
https://www.reddit.com/r/explainlikeimfive/comments/kji6n/eli5_compound_interest/?utm_source=share&utm_medium=ios_app&utm_name=iossmf
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