Valuation Flashcards
Gordon’s formula
(Intrinsic value)
D (1+g)
——
r - g
Dividends
R = rate of market returns
G = expected dividends growth rate
How discover further dividends with initial dividends and growth rate?
Dn = D0 (1+g) ^ n
How to reach P4 with P0, g and r?
P4 = P0 (1+ g ) ^ 4
Payout Ratio
Dividend
—————-
EPS
OR
Dividends
—————-
Net income
“Justified” P/E
Payout Ratio x (1+ Growth Rate)
———————————————
Cost of equity - Growth Rate
“g”
Retation Rate x ROE
Retation Rate
Grow rate
“g”
(1-payout ratio) (ROE)
CAPM = estimate what input on DDM?
K = required return on Equity
K = Rf + beta ( Rm - Rf)
P/E with DDM
P/E = (D/E)
———
(k-g)
Calculation of Book Value.
Stable?
Not stable?
Stable = beginning Book Value
Not stable = avg. book value
What is the most risky type of stock from the investor perspective?
Callable common stocks
What is a puttable stock?
Stock that permits the shareholder exercises de put option and limit his potential loss
Book value of equity
Assets - Liabilities
Market value of equity
Shares outstanding x Price
(Using one or more valuation models)
Intrinsic Value
One or more
