DDM

Question 1

Present Value of Growth Opportunities

Answer 1

Value of a stock =
Value of the company assuming zero growth +
The present value of growth opportunities (PVGO)

Vo = E1 / r + PVGO

Question 2

H model

Answer 2

Vo = Do (1 + gl)/ (r- gl) + Do H (gs - gl)/ r-gl

Question 3

long term sustainable growth based on ROE

Answer 3

Retention Rate x Return on Equity (PRAT)

Question 4

Justified leading P/E

Answer 4

Po/E1 = (1-b) / (r - g)

Question 5

Trailing P/E

Answer 5

Po/Eo = [(1-b) (1 +g)] / (r - g)