Valuation methods, Financial Management

Assignment Help:

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.


Related Discussions:- Valuation methods

Theoretical spot rates, The theoretical spot rates for treasury secur...

The theoretical spot rates for treasury securities represent the appropriate set of interest rates that should be used to value the risk from default-free cash fl

What financial managers look for when they analyze pro forma, What do finan...

What do financial managers look for when they analyze pro forma financial statements? Later than the pro forma financial statements are complete, financial managers analyze the f

Explain terminal value calculation at end of forcast period, Explain the te...

Explain the terminal value calculation at the end of the forecast period.  Why is it necessary? The firm whose business operation is being valued isn't expected to suddenly cea

Activity-based costing - abc, An accounting technique that identifies the a...

An accounting technique that identifies the activities that a firm does, and then allocates indirect costs to products. An activity based costing (ABC) system finds the relationshi

Determine the financial structure of business risk, Determine the Financial...

Determine the Financial structure of business risk Financial structure shifts toward suppliers of funds recognize a more highly levered position increased financial risk associ

Abnormal earnings valuation model, A technique for knowing a company's wort...

A technique for knowing a company's worth that is based on earnings and book value. It is also known as the residual income model, it seems at whether management's decisions cause

Techniques of inventory control, Examine the reasons for holding inventorie...

Examine the reasons for holding inventories by a firm & also discuss the techniques of inventory control

Price-yield relationship in bonds, Typically in a bond, we find...

Typically in a bond, we find an inverse relation between the price and the required yield. We know that the price of the bond is the present val

Mathematical property of median, Mathematical Property The sum of the d...

Mathematical Property The sum of the deviations of the items from median, ignoring signs, is the least. For example, the median of 6, 10, 14, 18 and 22 is 14. The deviations fr

Operating leverage, Operating Leverage Operating leverage define the de...

Operating Leverage Operating leverage define the degree to which an organization cost of operation is fixed as opposed to variable. Therefore, it is a measure of how much a fir

Write Your Message!

Captcha
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