Equity Valuation.pptxVIP

1 EQUITY VALUATION 2 Dividend Discount Model (DDM) Today’s price should equal the Present Value (PV) of the entire dividend stream a stock will pay in the future Future dividends may be equal, grow, or decline Valuation FundamentalsCommon Stock 3 Zero Growth Valuation Model Zero growth model assumes a constant, non-growing dividend stream: D1 = D2 = ... = D? Plugging constant value D into the common stock valuation formula reduces to simple equation for a perpetuity: 4 Zero Dividend Growth Example Some common stocks can be valued using the zero dividend growth assumption. Assume Century