Stock DCF Math

# Stock DCF Math - Discounted Cash Flow Stock Valuation...

This preview shows pages 1–2. Sign up to view the full content.

Discounted Cash Flow Stock Valuation Models Value of stock = 0 = PV of expected future cash flows CF 1 CF 2 CF = (1 + r S ) 1 + (1+r S ) 2 + .…. + (1+r S ) CFt = t =1 (1 + r S ) t . Constant Dividend Growth Model D 0 (1 + g) 1 D 0 (1 + g) 2 D 0 (1 + g) 0 = (1 + r S ) 1 + (1 + r S ) 2 + .…. + (1 + r S ) (1 + g) t = D 0 t =1 (1 + r S ) t P 0 D 0 (1 + g) D 1 •solve for r S = r S - g = r S - g r S = D 1 /P 0 + g r S = dividend + growth yield Nonconstant (Supernormal) Growth Model D 1 D 2 D N D N+1 D ± ² = (1+r S ) 1 + (1+r S ) 2 + .…. + (1+r S ) N + (1+r S ) N+1 + .…. + (1+r S ) ± PV of dividends during the

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

## This note was uploaded on 07/17/2010 for the course UGBA 18195 taught by Professor Johngonzales during the Summer '10 term at Berkeley.

### Page1 / 2

Stock DCF Math - Discounted Cash Flow Stock Valuation...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online