Discounted dividend and corporate valuation models

Assignment Help Finance Basics
Reference no: EM133074984

Although there are similarities and differences between the discounted dividend and corporate valuation models.

Similarities:

Both the discounted dividend and corporate valuation model helps to determine the value of share owners interest (equity share capital) in a business. 

Differences:

The approach through which valuation is done is completely different. The discounted dividend model calculates the firm's stock price as the present value of the expected future dividends at the firm's required rate of return on equity, while the corporate valuation model calculates the firm's stock price as the present value of the expected free cash flows at the firm's weighted average.

Is it important for companies to follow each model or do you think one is more important than the other?

Reference no: EM133074984

Questions Cloud

Analyze the impact of technology trend selected : Analyze the types of technology trends researched. Analyze the impact of the technology trend selected. Examine strategies to evaluate system effectiveness.
Propose effective approaches to curb exchange rate : In your opinion, propose effective approaches to curb exchange rate risks for the MNC. Provide four (4) constructive points for this question.
What is the irr of the project : A firm invests in a project that will produce a steady yearly savings of $5,050,000 starting one year from now for 30 years. The investment needed for the proje
Discuss the pro and cons of conventional loans : Instructions: After reading the following information, your assignment is to discuss the pro and cons of Conventional loans, FHA loans and VA loans.
Discounted dividend and corporate valuation models : Although there are similarities and differences between the discounted dividend and corporate valuation models.
Explain market price and the intrinsic value of shares : Using the knowledge you have obtained in this unit, explain which country you believe would have the largest and which country would have the smallest differenc
Calculate the revenues to be recognized for the years : Calculate the revenues to be recognized for the years 2017 and 2018 assuming GIG Company uses the percentage of completion method
How to predict short-term volatility in stock market : What factors would you use to build a model to optimize how to predict short-term volatility in stock market.
Characteristics of firms from different industries : The following table shows characteristics of firms from different industries in the Australian stock market.

Reviews

Write a Review

Finance Basics Questions & Answers

  How much equity will you get to keep as cash

You purchased a property 4 years ago for $275,000 using a 75% LTV mortgage. The mortgage was a 15 year fully amortizing FRM with a 3.8% rate.

  What is the project npv if the tax rate

The annual operating cash flow is $95,257 and the cost of capital is 16% What is the project's NPV if the tax rate is 39%?

  Compare herbert croly and progressive democracy views on us

Compare Herbert Croly and Progressive Democracy, Theodore Roosevelt, from The New Nationalism and Woodrow Wilson, from The New Freedom views on America and its desired future.

  Why the strategy will yield a risk-free profit

Your boss is worried that the trading strategy involves short-selling bond C which might expose the firm to future cash-outflows

  What is the required rate of return on aa stock

What is the required rate of return on AA's stock? Do not round intermediate calculations. Round your answer to one decimal place.

  Purchase a motorcycle

You want to purchase a motorcycle 4 years from now, and you plan to save $3,500 per year, beginning immediately. You will make 4 deposits in an account that pays 5.7% interest. Under these assumptions, how much will you have 4 years from today?

  Suppose an investment offers to triple your money in 12

text is fundamentals of corporate finance by ross westerfield jordan. the problem comes from chapter 5 amp5 and the

  What are the primary lines of business

Your analyses should address the following items: What are the primary lines of business of these two companies as shown in their notes to financial statement

  Determine how much money needs to be set aside

determine how much money needs to be set aside from the hospital's monthly revenues for the next 48 months in order to pay for the anticipated expenditure

  Appreciate at an annual rate

Your coin collection contains 49 1952 silver dollars. If you relatives purchased them for their face value when they were new, how much will your collection be worth when you retire in 2047, assuming that they appreciate at an annual rate of 4 pe..

  How long would it take the population to do this job

Sheila Brown times 60 people doing a job. The mean time is 6.4 minutes, with a standard deviation of 0.5 minutes. How long would it take the population to do this job?

  What is an estimate of growth company cost of equity

Growth Company's current share price is $19.90 and it is expected to pay a $1.25 dividend per share next year. After that, the firm's dividends are expected.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd