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DDM 2 ST
DDM 2 ST
This model is designed to value the equity in a firm, with two stages of growth, an initial
period of higher growth and a subsequent period of stable growth.
Assumptions
1. The firm is expected to grow at a higher growth rate in the first period.
2. The growth rate will drop at the end of the first period to the stable growth rate.
3. The dividend payout ratio is consistent with the expected growth rate.
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Two-Stage Dividend Discount Model
Do you want to calculate the growth rate from fun Yes (Yes or No)
If yes, enter the following inputs:
Net Income Currently = $2,122.00 Last year (in currency)
Book Value of Equity = $6,237.00 $6,155.00 (in currency)
Tax Rate on Income= 40.00% (in percent)
The following will be the inputs to the fundamental growth formulation:
ROE = 34.48% (in percent)
Retention = 58.00% (in percent)
Do you want to change any of these inputs for the high growth p Yes (Yes or No)
If yes, specify the values for these inputs (Please enter all variables)
ROE = 34.48% (in percent)
Retention = 58.00% (in percent)
Do you want to change any of these inputs for the stable growth Yes (Yes or No)
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Two-Stage Dividend Discount Model
Before reviewing the output, check to see if any warnings appear on the next page.
Warnings
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Two-Stage Dividend Discount Model
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Two-Stage Dividend Discount Model
The dividends for the high growth phase are shown below (upto 10 years)
1 2 3 4 5
Dividends $2.81 $3.42 $4.17 $5.08 $6.20
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Two-Stage Dividend Discount Model
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Two-Stage Dividend Discount Model
s of growth, an initial
e growth.
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Two-Stage Dividend Discount Model
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Two-Stage Dividend Discount Model
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Two-Stage Dividend Discount Model
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Two-Stage Dividend Discount Model
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