Valuing Shares

0.0(0)
Studied by 0 people
call kaiCall Kai
learnLearn
examPractice Test
spaced repetitionSpaced Repetition
heart puzzleMatch
flashcardsFlashcards
GameKnowt Play
Card Sorting

1/5

encourage image

There's no tags or description

Looks like no tags are added yet.

6 Terms

1
New cards

zero growth dividend discount model formula

P0 = Div1/r

2
New cards

Constant growth dividend discount model formula

P0 = Div1/(r-g)

3
New cards

Non-constant growth dividend discount formula

P0 = Div1/(1+r) + Div2/(1+r)² + … + DivH/(1+r)^H + PH/(1+r)^H

4
New cards

Why do companies watch their own share price closely?

  • Companies often go to market again to issue more share, after their IPO, to fun expansion

  • Corporate acquisitions


5
New cards

Return over one year formula

R = (D1 + P1 - P0)/P0

R = expected rate of return over the period

D1 = Next expected dividend

P0 = stock price today

P1 = stock price expected in 1 year

6
New cards

Equity Rate of Return (rearranging previous formula)

R = D1/P0 + g

R = total return

D1/P0 = dividend yield

g = growth