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

Evaluate the annual premium under this policy, Question: A 10-year defe...

Question: A 10-year deferred life assurance policy with variable benefits is issued to a select life aged 36. The policy provides the following benefits:- Sum assured is

Calculate the effective annual rate, The credit term from the supplier is 2...

The credit term from the supplier is 2/30, net 60. Question: Calculate the effective annual rate if the firm does not take the discount.

share-appreciation mortgages (sams), High interest rates in the earl...

High interest rates in the early 1980s brought about this innovative mortgage arrangement. SAMs use inflation as a way of paying for the property. The lender agre

Interpretations of market based ratio''s, Market based Ratio's   PE:...

Market based Ratio's   PE:           The Price-to-Earnings ratio is calculated by market price per share to earnings per share and is expressed in terms of times. It shows h

State expectations theory of term structure of interest rate, State the exp...

State the expectations theory of the term structure of interest rates. Expectations theory: The expectations theory of the term structure of interest rates specifies that

Dividend yield plus growth in dividend method, Dividend yield plus growth i...

Dividend yield plus growth in dividend method When the dividends of the firm are predictable to grow at a constant rate and the dividend payout ratio is constant, this techniq

Case study - volatility trading, Case Study: Volatility Trading (a) The...

Case Study: Volatility Trading (a) The understanding in this case study deal with Convertible as well as Reverse-Convertible bonds. These are interesting instruments by themsel

How to select the pattern of the investment, Q. How to Select the pattern o...

Q. How to Select the pattern of the investment? When the funds have been procured than a decision about the investment pattern is to be taken. The selection of the investment p

Explain about the debt policy, Explain about the debt policy Designing...

Explain about the debt policy Designing debt policy the debt policy of a firm is significantly influenced by the cost consideration. In designing financing policy, that is, p

WACC, The following is the existing capital structure of Company XYZ Ltd. O...

The following is the existing capital structure of Company XYZ Ltd. Ordinary shares at Shs.10 par 1,000,000 Retained 800,000 12% preference shares Shs.10 par 400,000 16% loan Shs.1

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