CORPORATE FINANCE STUDY GUIDE WELL EXPLAINED #12.

CORPORATE FINANCE STUDY GUIDE WELL EXPLAINED #12

1. Dividend Dis-
Discounted cash-flow model which states that
count Model
today's stock price equals the present value of all
expected future dividends



2. Constant
a widely cited dividend valuation approach that
Growth Model
assumes that dividends will grow at a constant
(infinite)
rate, but a rate that is less than the required
return



3. Constant
Should include terminal value (what you sell it for
Growth Model
(finite) @ end

To do so you calculate the non-constant growth
rate until horizon date T...then calculate the
terminal value as you would in an infinite CGM w/
denominator raised to power T

4. expected rate of
return (constant The rate of return expected to be realized from
growth model) an invest- ment; the weighted average of the
probability distribution of possible results



5. capital gains
yield the dividend growth rate, or the rate at which the
value of an investment grows


6. Dividend Yield a stock's expected cash dividend divided by its
current
price

1/

, CORPORATE FINANCE STUDY GUIDE WELL EXPLAINED #12




2/