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Agenda
Value perspective
Types of valuation models
Agenda
Value perspective
Types of valuation models
Dividend discount
model
V0
D1 P1
1 r
n
Dt
Pn
or
V0
t
n
(1 r )
t 1 (1 r )
V0
t 1
Dt
(1 r )t
2004
2005
2006
2007
2008
2009
2010
2011
2012
ABC Corp.
EPS ($)
DPS ($)
Payout ratio (%)
0.41
1
244%
0.12
1
833%
-0.36
1
n/m
1.31
1
76%
1.86
1
54%
0.39
1
256%
0.88
1
114%
1.58
1
63%
4.26
1
23%
4.92
1
20%
XYZ Corp.
EPS ($)
DPS ($)
Payout ratio (%)
0.62
0.18
29%
0.66
0.22
33%
0.77
0.25
32%
0.72
0.29
40%
0.52
0.3
58%
0.72
0.39
54%
1.11
0.33
30%
1.2
0.35
29%
1.3
0.37
28%
0.77
0.25
32%
State whether a dividend discount model is appropriate choice for ABC corp. or XYZ corp. ?
V0 D0 *
1 g
rg
D1
rg
Do = Dividend at time 0
D1 = Dividend at time 1
g = dividend growth rate
r = required return of equity
10
11
Three stage
Spread sheet modeling
12
13
14
15
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