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    The value of equity for a shareholder should be the present value of future expected dividends. The required rate of return is used to discount future dividends to their present value. If dividend growth is constant, the value of equity can be calculated as the current dividend divided by the difference between the required rate of return and the constant dividend growth rate.

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    The value of equity for a shareholder should be the present value of future expected dividends. The required rate of return is used to discount future dividends to their present value. If dividend growth is constant, the value of equity can be calculated as the current dividend divided by the difference between the required rate of return and the constant dividend growth rate.

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    9 views1 page

    Week 7 ACCT3610 Study Notes

    Uploaded by

    haydensmith312
    The value of equity for a shareholder should be the present value of future expected dividends. The required rate of return is used to discount future dividends to their present value. If dividend growth is constant, the value of equity can be calculated as the current dividend divided by the difference between the required rate of return and the constant dividend growth rate.

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    Lecture 7 Prospective Analysis: Valuation Theory & Concepts The value of the equity to a share holder should be the

    e present value of future dividends

    r = reqd rate of return If div growth is constant: value = Div/(r-g)

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