Scribd Logo
Upload

Welcome to Scribd!

  • Stock Valuation - Class 5

    Uploaded by

    Janneke van Zegveld
    3 views7 pages
    The document presents three dividend discount models - a constant growth model, simple two-stage model, and multiple stage growth model - to estimate the price per share of Company ABC. The constant growth model estimates the price at €62.40 per share, assuming long-term dividend growth of 4% and a required rate of return of 9%. The simple two-stage model estimates the price at €80.73 per share, with 10% growth for the first 3 years transitioning to 4% long-term growth. The multiple stage growth model estimates the highest price of €99.36 per share, with declining growth rates over 9 years before transitioning to the long-term 4% growth

    Original Description:

    Copyright

    © © All Rights Reserved

    Available Formats

    XLSX, PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    Report this Document
    The document presents three dividend discount models - a constant growth model, simple two-stage model, and multiple stage growth model - to estimate the price per share of Company ABC. The constant growth model estimates the price at €62.40 per share, assuming long-term dividend growth of 4% and a required rate of return of 9%. The simple two-stage model estimates the price at €80.73 per share, with 10% growth for the first 3 years transitioning to 4% long-term growth. The multiple stage growth model estimates the highest price of €99.36 per share, with declining growth rates over 9 years before transitioning to the long-term 4% growth

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    3 views7 pages

    Stock Valuation - Class 5

    Uploaded by

    Janneke van Zegveld
    The document presents three dividend discount models - a constant growth model, simple two-stage model, and multiple stage growth model - to estimate the price per share of Company ABC. The constant growth model estimates the price at €62.40 per share, assuming long-term dividend growth of 4% and a required rate of return of 9%. The simple two-stage model estimates the price at €80.73 per share, with 10% growth for the first 3 years transitioning to 4% long-term growth. The multiple stage growth model estimates the highest price of €99.36 per share, with declining growth rates over 9 years before transitioning to the long-term 4% growth

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    of 7

    Multiple growth dividend discount models

    Company ABC

    Last dividends paid 3.00 € per share


    estimated long term growth 4% per annum
    RRR (Required Rate of Return) 9%
    Current growth of dividends 10% Per annum

    Constant growth model 62.40 € C6*(1+C7)/(C8-C7)

    Simple two stage model

    High growth 5 years


    Long term growth

    Year 1 2 3
    Growth of dividend 10% 10% 10%
    Dividend 3.30 € 3.63 € 3.99 €

    PV 3.03 € 3.06 € 3.08 €


    Present Value of TV
    Present Value of TV (diff appr)
    Price per share 80.73 € per share

    Multiple Stage Growth Model

    5 years of high growth


    5 years of convering towards long term growth
    Annual convergence 1% (High g - long g)/ years of conve
    from Y11 on, long term growth

    Year 1 2 3
    Growth of dividend 10% 10% 10%
    Dividend 3.30 € 3.63 € 3.99 €
    PV 3.17 € 3.36 € 3.55 €
    Present Value of TV

    Price per share 99.36 € per share


    RRR - rate thats investors demands back for investing

    PV (price) = D1 / (rrr - long term growth g )


    - > D1 = D0(1+ growth in dividend)

    Terminal value: something that growths forever at same rate


    = Last dividend*(1 + estimated long term growth 4 ) / (RRR - g)
    Terminal value of 100,50 euro means that thats the worth of firm
    sure..)

    - > When using constant growth model ( RRR > g)

    - size of firm/market plays big role in estimating long term growt


    - if a firm keeps growing, they gain market share

    Pv = FV / (1 + RRR) ^n

    PRICE PER SHARE = Sum of all prices + TV

    CANT DO THAT
    4 5 6
    10% 10% 10%
    4.39 € 4.83 € 5.31 €

    Terminal Value
    100.50 €

    3.11 € 3.14 € 3.17 €


    65.32 €
    65.32 €

    ears of conve

    4 5 6 7 8 9
    10% 10% 9% 8% 7% 6%
    4.39 € 4.83 € 5.27 € 5.69 € 6.09 € 6.45 €

    TV
    3.75 € 3.97 € 4.16 € 4.32 € 4.45 € 4.53 €
    TV (PV)

    3.71%
    emands back for investing

    term growth g )
    vidend)

    that growths forever at same rate


    ated long term growth 4 ) / (RRR - g)
    uro means that thats the worth of firm at beginnning year 6 (not

    owth model ( RRR > g)

    big role in estimating long term growth


    hey gain market share

    all prices + TV

    US GDP Apple
    Billions PV 24,000.00 € 100.00 €
    Billions FV in 170,560.40 € 910,043.82 €
    growth 4% 20%

    This could not happen, this would indicate that apple is few times larger than the whole US GDP
    Therefor, don’t be absurd with estimating long term growth for companies…

    10
    5%
    6.77 €

    140.89 €
    4.58 €
    59.51 €
    e whole US GDP

    You might also like