If log is set to FALSE (default value) dividends follow:
$$d_t = \mu + d_{t-1} + \epsilon_t$$
where \(\epsilon \sim \mathcal{N}(0, \sigma^2)\). The default parameters
are \(\mu = 0.0373\), \(\sigma^2 = 0.1574\) and \(d[0] = 1.3\) (the initial value of the dividend sequence).
The above equation can be solved to yield the fundamental price:
$$F_t = \mu(1+r)r^{-2} + r^{-1}d_t$$
If log is set to TRUE then dividends follow a lognormal distribution or log(dividends) follow:
$$\ln(d_t) = \mu + \ln(d_{t-1}) + \epsilon_t$$
where \(\epsilon \sim \mathcal{N}(0, \sigma^2)\). Default parameters are
\(\mu = 0.013\), \(\sigma^2 = 0.16\). The fundamental price in this case is:
$$F_t = \frac{1+g}{r-g}d_t$$
where \(1+g=\exp(\mu+\sigma^2/2)\).
All default parameter values are those suggested by West (1988).