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

Constructing synthetic swaps, (a) Prior to FAS 133 if companies qualified ...

(a) Prior to FAS 133 if companies qualified for hedge accounting their hedges were assumed to be perfect-no valuation or testing required. Currently under FAS 133 risk managers se

Credit enhancement mechanisms, Credit enhancement is a key part...

Credit enhancement is a key part of the securitization transaction in structured finance, and is important for credit rating agencies. Credit enhancem

Calculate total asset turnover and return on equity ratio, Given the follow...

Given the following information for Tandoori Grill Restaurant, calculate the total asset turnover and return on equity ratios: Net Profit Margin 8% Return on Assets 15% Debt R

Define relationship between bond''s market price and its ytm, What is the r...

What is the relationship between a bond's market price and its promised yield to maturity?  Explain. A bond's market price relies on its yield to maturity abbreviated as YTM.  Wh

Evaluate return on capital employed, a) Gross profit = $500,000 and Expense...

a) Gross profit = $500,000 and Expenses = $100,000 for Year 2. b) Year 2 GPM = $500k / $1,000k = 50.0% Year 1 GPM = $400k / $850k = 47.05% Year 2 NPM = $400k / $1,000k =

Market capitalization, Market Capitalization : Often referred to as marke...

Market Capitalization : Often referred to as market cap, it refers to the value of a company, that is, the market worth of its outstanding shares. A common misconception is that

Reasons for time preference of money, Q. Reasons for Time Preference of Mon...

Q. Reasons for Time Preference of Money? 1) Future Uncertainties: One of the reasons for preference for current money is that there is a certainty about it whereas the future

Fund managers or the asset management company, Fund Managers or the Asset M...

Fund Managers or the Asset Management Company (amc) The role of fund managers is highly significant in the mutual fund operations. So far, this role is being played by the Mutu

Define the process of wealth maximisation, Define the process of Wealth Max...

Define the process of Wealth Maximisation Shareholders' wealth can be defined as total market value of all the equity shares of company. So when we talk about maximising wealth

Explain about book value weights, Q. Explain about Book Value Weights? ...

Q. Explain about Book Value Weights? Book Value Weights: - Book value weights are calculating form the values taken from the balance sheet. The weight to be assigned to every s

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