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l2 35 discounted dividend valuation

This class was created by Brainscape user Steven Popovic. Visit their profile to learn more about the creator.

By: Steven Popovic
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Decks in this class (16)

a compare dividends, free cash flow, and residual income as inputs to discounted cash flow models, and identify investment situations for which each measure is suitable;
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b calculate and interpret the value of a common stock using the dividend discount model (DDM) for single and multiple holding periods;
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c calculate the value of a common stock using the Gordon growth model, and explain the model’s underlying assumptions;
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d calculate and interpret the implied growth rate of dividends using the Gordon growth model and current stock price;
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e calculate and interpret the present value of growth opportunities (PVGO) and the component of the leading price-to- earnings ratio (P/E) related to PVGO;
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f calculate and interpret the justified leading and trailing P/Es using the Gordon growth model;
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g calculate the value of noncallable fixed-rate perpetual preferred stock;
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h describe strengths and limitations of the Gordon growth model, and justify its selection to value a company’s common shares;
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i explain the assumptions and justify the selection of the two-stage DDM, the H-model, the three-stage DDM, or spreadsheet modeling to value a company’s common shares;
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j explain the growth phase, transitional phase, and maturity phase of a business;
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k describe terminal value, and explain alternative approaches to determining the terminal value in a DDM;
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l calculate and interpret the value of common shares using the two-stage DDM, the H-model, and the three-stage DDM;
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m estimate a required return based on any DDM, including the Gordon growth model and the H-model;
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n explain the use of spreadsheet modeling to forecast dividends and to value common shares;
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o calculate and interpret the sustainable growth rate of a company, and demonstrate the use of DuPont analysis to estimate a company’s sustainable growth rate;
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p evaluate whether a stock is overvalued, fairly valued, or undervalued by the market based on a DDM estimate of value.
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l2 35 discounted dividend valuation

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