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11 Cards in this Set
- Front
- Back
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Single Stage Model or Gordon Growth Model
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V0 = DIV1 / (r - g)
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Multi-Stage Model (Process)
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1. Build dividend stream for first peiod(s)
2. Find the terminal value (value of constant growth period as of year before constant growth) 3. Find PV of all dividends (plug into NPV) |
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What does it mean if a company has 100% payout?
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g = 0
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How do you calculate DIV1?
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DIV0(1 + g)
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Payout Ratio
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Dividends / (Net Income or EPS)
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Retention Ratio
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Retained Earnings / (Net Income or EPS)
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Return on Equity
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Net Income / Total Equity
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How do you determine g (growth rate)?
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g = ROE x Retention Ratio
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Formula Dividend Yield
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DIV1 / Current Price
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P/E Ratio
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Current Stock Price / EPS
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Retained Earnings formula
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EPS - DIV1
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