Valuation methods, Financial Management

Valuation Methods:

  1. 2 - Year Method
  2. Perpetual Growth Method
  3. Constant Growth Method
  4. Zero Growth Method
  5. Growth Phases

Valuation Model:  'Constant Growth Method'

The value is given by,

 

à V = {D x (1 + g) / (Ke - g)}           where, V = intrinsic value

                                                                        D = dividend at time 't'

                                                                        Ke = expected rate of return

                                                                        g = constant growth rate of return

 

The constant growth model has been used as it best approximates the situation for stocks in this sector. Also, this helps in simple calculations.

Posted Date: 7/25/2012 8:53:07 AM | Location : United States







Related Discussions:- Valuation methods, Assignment Help, Ask Question on Valuation methods, Get Answer, Expert's Help, Valuation methods Discussions

Write discussion on Valuation methods
Your posts are moderated
Related Questions
Great Pumpkin Farms just paid a dividend of $3.50 on its stock. The growth rate in dividends is expected to be a constant 5 percent per year indefinitely.  Investors require a 16 p

Discounted cash flow analysis is the term employ to describe the technique whereby the value of future cash flows is discounted back to a present value so that the monetary values

Checklists or questionnaires Audit firm will have a standard list of control questions. Audit staff can quickly ascertain which if any, are in operation by the client. There

a) Critical Path: A, B, E and F. Project completed in 11 weeks. Subtract one mark for each error made. Maximum marks can only be awarded if the candidate explicitly indicat

Monitoring and Controlling Budgets: The preparation of budgets is only part of the budget cycle.  Once set, an organisation should actively monitor actual revenue and expenditu

Comment on the subsequent statement: “Since the U.S. imports more than it exports, it is essential for the U.S. to import capital from foreign countries to finance its current acco

Why do we focus on cash flows instead of profits when evaluating proposed capital budgeting projects? We focus on cash flows at the place of profits when evaluating proposed ca

Futures Contract It is an obligation to purchase or sell an asset at an agreed-upon price on an exact future date. The buyer commits himself or herself to buy the asset, and th

Explain the meaning of - Purchase consideration The  type  of  offer  made  to  target  company's  shareholders  would have  a  big  impact on acceptance. Apparently the price

The volatility assumption has a great influence on the arbitrage free value of the bond. The higher the expected volatility, the greater the value of an option. W