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[DOC File]CHAPTER 8
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Dec 31, 2003 · Future stock price--constant growth Answer: c Diff: M N. In 10 years, this stock will be a constant growth stock. Therefore, use the constant growth formula and find the price in Year 10. In order to find the value in Year 10, determine the dividend in Year 11: D11 = 0.75 ( 1.25 ( 1.35 ( (1.06)8 = $2.0172. Now, calculate the stock price in Year 10:
constant growth stock valuation example

[DOC File]Chapter 1 -- An Introduction To Financial Management
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(2) Constant growth model (the dividend growth rate, g = constant) For example, if D0 = $2.00, g = 5%, rs = 10%, then . If the market price (P0) is $40, what should you do? You should buy it because the stock is under-priced . Common stock valuation: estimate the expected rate of return given the market . price for a constant growth stock
constant growth model formula

[DOC File]BA 443 Midterm Formula Sheet - Oregon State University
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Relative valuation: Intrinsic value: Comparable multiple * Firm-specific denominator value. P/E ratio = stock price / earnings (or net income) per share. P/S ratio = stock price / sales. P/BV ratio = stock price / (book value of common equity) P/EBITDA ratio = stock price / (Earnings before Interest taxes depreciation and amortization)
constant growth formula calculator

[DOCX File]Unisa Study Notes
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Find the value of the stock at the end of the initial growth period, PN=(DN+1)/Ks-g2), which is the present value of all dividends expected from year N + 1 to infinity, assuming a constant dividend growth rate, g2. This value is found by applying the constant-growth model to the dividends expected from year N +1 to infinity.
constant growth model

[DOC File]Multiple Choice Questions
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13. Which of the following need to be assumed when using the dividend valuation formula to estimate a share value? 1 The recent dividend, ‘D0’, is typical i.e. doesn’t vary significantly from historical trends. 2 Growth will be constant. 3 The cost of equity will remain constant. 4 A majority shareholding is being purchased A 1, 2 and 3 only
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[DOC File]1
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The Formula for common stock. PV = Po*= DIV1 / (1+ rCE) + DIV1 / (1+ rCE) 2 + DIV1 / (1+ rCE) 3 + ... +... = DIV 1 / rCE. Dividends Cash Flow Stream grows according to the Discrete Compound Growth Formula. DIVt+1 = DIVt x (1 + g) t. t = time in years. Zero Growth Model Pricing. PV = Po* = DIV1 / rCE . Constant Growth Model Pricing . PV = Po* = DIV1 / (rCE -g) …
constant growth model example

[DOC File]FIRST PRINCIPLES OF VALUATION
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The Constant Growth Case. A common stock with a constant dividend growth rate is like a perpetuity that is growing at this rate. We can develop the equation of a constant growth perpetuity as follows: P0 = D1 + D2 + D3 + … + D( , (1+r)1 (1+r)2 (1+r)3 (1+r)(with a constant growth rate , g, this equation becomes
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[DOC File]Management's primary goal is to maximize stockholder wealth
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This result is nonsense, because the growth rate is greater than the required return, which means you cannot use the constant growth formula. h. Using the implied 5-year growth rate as a constant growth rate may have been a problem in the valuation. The long-run constant growth rate of most stocks is expected to be between 3% and 7%.
constant growth stock valuation calculator

[DOC File]CHAPTER 1
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The holder of a share of stock will receive dividends over the holding period, plus the value of the stock when he or she sells it. ... a. g represents a constant rate of growth whereas g* represents a constant rate of growth for time period *. ... The valuation formula requires that the stage one growth rate is always higher than the stage two ...
constant growth stock valuation example

Constant growth stock valuation formula