Equity Valuation (Formulas)

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Last updated 2:55 AM on 8/11/26
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10 Terms

1
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Perceived mispricing

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2
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The value of a stock for infinite holding periods is:

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3
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The value of a stock using the Gordon growth model is:

• Dividends grow at a constant growth rate g.

• Discount rate r is constant and is greater than g.

• Dividends bear and understandable and consistent relationship with profits.

<p>• Dividends grow at a constant growth rate g.</p><p>• Discount rate r is constant and is greater than g.</p><p>• Dividends bear and understandable and consistent relationship with profits.</p>
4
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The present value of growth opportunities (PVGO),

• present value of the company with no growth component and

• present value of growth opportunities.

<p>• present value of the company with no growth component and</p><p>• present value of growth opportunities.</p>
5
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The value of a stock using the H-model is:

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6
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Earnings retention rate (b)

Simply the % of earnings retained after paying out dividends.

Also calculated as 1 - payout ratio

<p>Simply the % of earnings retained after paying out dividends.</p><p></p><p>Also calculated as 1 - payout ratio</p>
7
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Dividend Payout Ratio

b = % of retained earnings after paying dividends

<p>b = % of retained earnings after paying dividends</p>
8
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Sustainable growth rate

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9
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FCFF

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10
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FCFE

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