1. What are the relevant cash flows for valuing a stock using different valuation methods (Free...

70.2K

Verified Solution

Question

Finance

1. What are the relevant cash flows for valuing a stock usingdifferent valuation methods (Free Cash Flow to Equity and DividendDiscount Model)?
2. What are the different ways you can find cost of equity?Which is your preferred method?
3. When is a dividend discount model most suitable? When is itnot suitable?
4. What would be the input to Excel Rate function if you aretrying to find yearly dividend growth rate for a company which paid$2.5 as dividend exactly 4 years ago and has paid $3.5 today?
5. What is the difference between unsystematic and systematicrisk according to the Capital Asset Pricing model?

Answer & Explanation Solved by verified expert

3.6 Ratings (616 Votes)

1 A FREE CASH FLOW METHOD UNDER THIS METHOD VALUATION WILL BE DONE USING CASH FLOW OF A PARTICULAR STOCK IN A GIVEN PERIOD OF TIME PRICE OF STOCK IS COMPLETELY DEPENDS ON CASH FLOW FREQUENCY OF THAT STOCK B DIVIDEND DISCOUNT MODEL IT IS A FINANCIAL MODEL THAT VALUES SHARES AT DISCOUNTED VALUE OF THE FUTURE DIVIDEND PAYMENTS UNDER THIS MODEL PRICE OF A SHARE WILL BE CALCULATED BY NET PRESENT VALUE OF ALL EXPECTED FUTURE See Answer

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member

Transcribed Image Text

1. What are the relevant cash flows for valuing a stock usingdifferent valuation methods (Free Cash Flow to Equity and DividendDiscount Model)?2. What are the different ways you can find cost of equity?Which is your preferred method?3. When is a dividend discount model most suitable? When is itnot suitable?4. What would be the input to Excel Rate function if you aretrying to find yearly dividend growth rate for a company which paid$2.5 as dividend exactly 4 years ago and has paid $3.5 today?5. What is the difference between unsystematic and systematicrisk according to the Capital Asset Pricing model?