Zero Growth Dividend Discount Model
In this process the dividend in the future is anticipated and its current value is ascertained, employing this dividend value the price of the equity is determined. The investor employs this method to identify whether the stock is dealing at a premium or discount. If the stock is dealing at a discount then the traders will purchase it. If the stock deals at a premium then the traders will sell their stocks. It is computed employing the formula
Dividend Discounted value of the stock= Dividend given per share/Discount rate-Dividend growth rate.
The primary draw back in this method is that it does not work for companies that do not give dividend. The cost of capital can also be computed by this method. Dividend discount model employs the future cash flow anticipated to determine the stock price.
The dividend discount model employs three models they are specified below:
In Zero growth model, a model in which the dividend is presumed to be equal via out the entire analyzing period. There is no increase or decrease in dividend compensated and from that fact there is no growth from that fact it is called as Zero growth model.
The fixed growth model is a one in which there is fixed increase in the dividend compensated at a particular percentage. The dividend ke Earnings Per Shares on increasing at a particular percentage annually.
The final model is Variable-growth model in which there are three levels which are
a) Faster initial stage is a stage in which the dividend given increases drastically every year. The company In general offers a higher dividend in order to create a demand for its stock in the market.
b) Slower transition stage is a level in which the company attempts to consolidate in its growth. It will attempt to stabilize in this stage. The dividend afforded in this level will go stable.
c) Lower growth final stage is the last phase of the company when it is just about to wind up its operation due to several reason.
Dividend discount model is the model that is being widely employed these days for ascertaining the share price and there by to make investments conclusions.
Zero Growth Dividend Discount Model - Online Tutoring - Assignment Assistance
We at Expertsmind.com offer Zero Growth Dividend Discount Model homework help, Zero Growth Dividend Discount Model free tutorials and assignment assistance and Zero Growth Dividend Discount Model based question's answers by help of qualified and experienced finance tutors. We make easy Zero Growth Dividend Discount Model based assignments and homework for you with conceptual Dividend Policy theory and by solving each kind of Dividend Policy problems with a tricky approach.
ExpertsMind.com - Zero Growth Dividend Discount Model Assignment Help, Zero Growth Dividend Discount Model Homework Help, Zero Growth Dividend Discount Model Assignment Tutors, Zero Growth Dividend Discount Model Solutions, Zero Growth Dividend Discount Model Answers, Dividend Policy Assignment Tutors