Scribd Logo
Upload

Welcome to Scribd!

  • Zero Growth Model

    Uploaded by

    Maria
    6 views2 pages
    The document presents a zero growth dividend discount model. It shows a stock that pays a constant dividend of $2 per year forever with no expected growth. It then calculates the required rate of return as 10% to justify a current stock price of $10.5 using the constant growth formula. Finally, it provides the internal rate of return for an investment in the stock held for 1 to 5 years assuming the price increases each year at the rates shown.

    Original Description:

    FINANCIAL ANALYSIS OF COMPANY FIND

    Original Title

    Zero Growth model

    Copyright

    © © All Rights Reserved

    Available Formats

    DOCX, PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    Report this Document
    The document presents a zero growth dividend discount model. It shows a stock that pays a constant dividend of $2 per year forever with no expected growth. It then calculates the required rate of return as 10% to justify a current stock price of $10.5 using the constant growth formula. Finally, it provides the internal rate of return for an investment in the stock held for 1 to 5 years assuming the price increases each year at the rates shown.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as docx, pdf, or txt
    6 views2 pages

    Zero Growth Model

    Uploaded by

    Maria
    The document presents a zero growth dividend discount model. It shows a stock that pays a constant dividend of $2 per year forever with no expected growth. It then calculates the required rate of return as 10% to justify a current stock price of $10.5 using the constant growth formula. Finally, it provides the internal rate of return for an investment in the stock held for 1 to 5 years assuming the price increases each year at the rates shown.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as docx, pdf, or txt
    of 2

    Zero Growth model

    No growth in dividend…. Constant div in perp


    Years Dividend $
    0 $2
    1 $2
    2 $2
    3 $2
    4 $2
    5 $2
    ∞ $2

    R = 10%
    ¿1
    P 0=
    r −g

    r – g = Div1 / Po
    r = (Div1 / Po) +g
    1∗(1+5)
    R=
    10.5
    + 5%
    PV = 1.2/ (1+20%)^1  11.04 / (1+20%)^2
    ¿5
    p4
    n
    =
    r 
    (1 +r)

    0 2 3 4
    1 5

    20% 15% 10% 12% 8%

    You might also like