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Unformatted text preview: Computation of today’s stock price which states that the present value of the stock = present value (Discounted) of all expected future dividends Pg153 Pt – Present value of all expected future dividends after year t-Still based on PV of future dividends -Infinite dividends over infinite time When you move the time horizon (t) out, PV stays the same-sticks PV should not change No Growth of Dividends (Paid out to shareholders) – no growth of the company because there is no money to reinvest P0 = Div / r P0 = EPS (earnings per share) / r Constant growth of dividends – DDM in which dividends grow at a constant rate – pg154 P0 = Div / r-g P0 – share price Div1 – Expected dividend in year 1 R - Expected Return G – Dividend growth rate...
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This note was uploaded on 09/08/2010 for the course BUS 170 at San Jose State.