B2-M6 Flashcards
1
Q
Zero growth stock (perpetuity)
A
Stock value per share= Dividend/ Required Return
2
Q
Constant (Gordon) Growth Dividend Discount Model (DDM)
A
-dividends assumed to grow @ constant rate with stock price
Current Price= Dividend one year later/ (Required return- sustainable growth rate)
to determine dividend 1 yr later from current dividend:
current dividend(1+growth rate)
3
Q
P/E ratio
A
Stock price value today/ EPS expected in one year
4
Q
Price to Sales ratio
A
= Stock price today/ expected sales in one year
-applied to start up companies and companies with low earnings
