Aswath Damodaran 515
Firm Characteristics as Growth Changes
Variable High Growth Firms tend to Stable Growth Firms tend to
Risk be above-average risk be average risk
Dividend Payout pay little or no dividends pay high dividends
Net Cap Ex have high net cap ex have low net cap ex
Return on Capital earn high ROC (excess return) earn ROC closer to WACC
Leverage have little or no debt higher leverage
When you adjust the growth rate to make it stable, make the other inputs about
the firm consistent with the stable growth assumption.
