Dividend discount model

V 0= ¿
t
(1+i)

D1
- I: ke= + g ; CAPM; ROE
P0
- POR+RR(b)=1
- G=RR(b)*ROE
- Dt=Et*POR

FCFF: Free Cash Flow to the Firm

FCFF
V=
(1+i )t

- FCFF=¿+∫ ( 1−T ) + NCC−FCInv−WCI nv

- ¿+∫ ( 1−T )= EBIT (1−T )
- FCFE=FCFF−∫ ( 1−T )+ Net new borrowing
- I: WACC; ROA

FCFE: Free Cash Flow to Equity

FCFE
V=
( 1+i )t

- FCFE
- I: ke, CAPM, ROE

RELATIVE VALUATION
EPS∗P Income∗P
V 0= ∗Number of outstanding shares=Net
E E

Net Income−Preferred Dividends

EPS=
Common stock outstanding

Dividend per share

POR ( Dividend payout ratio ) =
Earning per share

Market value per share

Price ¿ earningratio=
Earning per share