Investopediacomvideo dividendgrowthmodel

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Unformatted text preview: iods? In addition to the dividends at the end of years 1 and 2, you expect to receive a dividend of $2.205 at the end of year 3 and a stock price of $15.435. Now how much would you be willing to pay? PV = 2 / 1.2 + 2.10 / (1.2)2 + (2.205 + 15.435) / (1.2)3 = 13.33 Or CF0 = 0; C01 = 2; F01 = 1; C02 = 2.10; F02 = 1; C03 = 17.64; F03 = 1; NPV; I = 20; CPT NPV = 13.33 Common Stock Valuation Common Stock Valuation Similar concept to Time Value of Money TVM: The present value is the discount of all expected future cash flow Common Stock: The price of the stock today is really just the present value of all expected future dividends Investment Style Investment Style Source: http://www.investopedia.com/video/ Dividend growth model Dividend growth model Value of a stock is the present value of the future dividends expected to be generated by the stock. D3 D1 D2 D∞ P0 = + + + ... + 1 2 3 ∞ (1 + k s ) (1 + k s ) (1 + k s ) (1 + k s ) ^ Common Stock Valuation using Common Stock Valuation using Dividend Discounted Model Scenario 1: Constant Dividend Scenari...
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This document was uploaded on 01/14/2014.

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