Stock evaluation
- Created by: Shreeya Bhan
- Created on: 10-04-13 16:51
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- Common stock evaluation: The price of the stock today is really just the present value of all expected future dividends
- CSE using DIscount Dividend Model
- Scenario 1: Constant Dividend: The firm will pay a constant dividend forever and The price is computed using the perpetuity formula: P0 =D/(Ks-g)
- Scenario 2: Constant Growth of Dividend: The firm will increase the dividend by a constant percent every period: Dt = D0 (1+g)t
- Nonconstant Growth: Dividend growth is not consistent initially, but settles down to constant growth eventually: P0=D1/(k-g)
- CSE using DIscount Dividend Model
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