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In financial economics, the dividend discount model (DDM) is a method of valuing the price of a company's capital stock or business value based on the assertion that intrinsic value is determined by the sum of future cash flows from dividend payments to shareholders, discounted back to their present value. [1][2] The constant-growth form of the ...
Fundamental analysis of stock prices. Discounted cash flow valuation. Gordon model. John Burr Williams (November 27, 1900 – September 15, 1989) was an American economist, recognized as an important figure in the field of fundamental analysis, and for his analysis of stock prices as reflecting their "intrinsic value". [1]
Stock valuation is the method of calculating theoretical values of companies and their stocks.The main use of these methods is to predict future market prices, or more generally, potential market prices, and thus to profit from price movement – stocks that are judged undervalued (with respect to their theoretical value) are bought, while stocks that are judged overvalued are sold, in the ...
Discounted cash flow. The discounted cash flow (DCF) analysis, in financial analysis, is a method used to value a security, project, company, or asset, that incorporates the time value of money. Discounted cash flow analysis is widely used in investment finance, real estate development, corporate financial management, and patent valuation.
Myron Jules Gordon, FRSC (October 15, 1920 – July 5, 2010) was an American economist. He was Professor Emeritus of Finance at the Rotman School of Management , University of Toronto . In 1956, Gordon along with Eli Shapiro, published a method for valuing a stock or business, now known as the Gordon growth model .
The sum of perpetuities method (SPM) [1] is a way of valuing a business assuming that investors discount the future earnings of a firm regardless of whether earnings are paid as dividends or retained. SPM is an alternative to the Gordon growth model (GGM) [2] and can be applied to business or stock valuation if the business is assumed to have ...
The sustainable growth rate is the growth rate in profits that a company can reasonably achieve, consistent with its established financial policy.Relatedly, an assumption re the company's sustainable growth rate is a required input to several valuation models — for instance the Gordon model and other discounted cash flow models — where this is used in the calculation of continuing or ...
The Modigliani–Miller theorem states that dividend policy does not influence the value of the firm. [4] The theory, more generally, is framed in the context of capital structure, and states that — in the absence of taxes, bankruptcy costs, agency costs, and asymmetric information, and in an efficient market — the enterprise value of a firm is unaffected by how that firm is financed: i.e ...