Non-constant growth DVM

Step-01:
Year Dividend per PV factor PV of dividends
share
1
2
3
4
5

Step-02:
D6/(kS – g)

D5 = Tk. 2.1962

D6 = D5*(1 + g)

=Tk.2.1962*1.05

= Tk.2.3060

P5 = D6/(kS – g )

= 2.3060/(0.12 – 0.05)

= 2.3060/0.07

= Tk. 32.9429

Step -03:
p5 = Tk.32.9429

p0 = Tk.32.9429* 1/(1.12)^5

= Tk.32.9429*0.5674 e
= Tk.18.6918

Step-04:
p0 = Tk.6.4615 + Tk.18.6918

= Tk.25.1533

= Tk.25.15

Year Estimated Estimated Estimated PV Factor PV of

EPS DPO DPS KS DPS

PV of Dividends =

Year Estimated Average Price PV

EPS P/E Factor

PV of Company Stock at beginning A+B =

Ks = Krf + (Km - Krf) * beta
Po = D1/(Ks - g)

FV = PV * (1 + g)^n
PV = Dn / (1 + Ks)^n

Standalone:
K(avg) = K1 P1 + K2 P2 + K3 P3
VAR = (K1 – K(avg))^2 * P1 + (K2 – K(avg))^2 * P2
SD = sqrt(VAR)

Avg expected return Kavg = (K1 + K2 + K3)/3

VAR = ((K1 – K(avg))^2) / 2 + ((K2 – K(avg))^2) / 2
SD = sqrt(VAR)

CV = SD / Kavg
Portfolio (2 asset)
Port. Return Kp = W1 K1 + W2 K2
Port. Risk Sigma = sqrt(WA^2 SigmaA^2 + WB^2 SigmaB^2 +2
WA WB SigmaA SigmaB rAB)

Multiple asset
Kp = W1 K1 + W2 K2…
Sigma = sqrt((K1 - Kavg)^2 P1 + (K2 - Kavg)^2 P2 )….

Sustainable growth model

ROE = EAT / Book Value
ROE per share = EPS/BVPS

BVPS end = BVPS begin + Retain per share

Retain per share = (EPS - dividend)

Growth rate of ROE = (EPS end - EPS begin)/EPS end

Retention ratio = (EPS – DPS)/EPS