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nominal risk free rate (1 + real risk-free rate)(1 + expected inflation) – 1 = real risk-free rate + expected inflation
Preferred Stock P = preferred dividend / k
Infinite Period Model P0 = D1 / (k - g)
Earnings Multiplier Model P0/E1 = D1/E1 / (k - g ) where D1/E1 = expected dividend payout ratio
Estimating the Value of g g = (RR)(ROE) where RR = (1 – dividend payout ratio), ROE = return on equity
Supernormal Growth Model 1:Forecast the div for each year 2:Use the constant growth model to find the value of the stock one period before the dividend that will grow at a constant rate 3: Find the PV of expected dividends and of the expected future stock price
Created by: thongkk