A model for estimating intrinsic price which uses the dividends of a companya.Discounted Dividend Modelb.Equity-based modelc.Corporate Modeld.Asset-based model
Question
A model for estimating intrinsic price which uses the dividends of a companya.Discounted Dividend Modelb.Equity-based modelc.Corporate Modeld.Asset-based model
Solution
The model for estimating intrinsic price which uses the dividends of a company is the Discounted Dividend Model. This model estimates the value of a stock by summing the present value of its future dividends. Here's a step-by-step explanation:
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Identify the dividends: The first step in this model is to identify the dividends that the company is expected to pay in the future. This can be done by looking at the company's history of dividend payments and its stated dividend policy.
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Discount the dividends: The next step is to calculate the present value of these future dividends. This is done by discounting the dividends back to the present using a discount rate. The discount rate is typically the required rate of return for the investor.
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Sum the discounted dividends: The final step is to sum up all of these discounted dividends. This gives the estimated intrinsic value of the stock.
So, the answer to your question is a. Discounted Dividend Model.
Similar Questions
According to the generalized dividend model, Group of answer choices the price of a stock is determined by the past performance of the business. the price of a stock is determined by dividends and the past performance of the business. the price of a stock is determined only by the present value of the expected stream of dividends. the price of a stock is determined only by the infinite sum of future dividends.
Dividend policies can impact a company's stock price because they:a.Affect investor perceptions of the company's financial healthb.Determine the total amount of cash available for investmentc.Determine the cost of equity capitald.Influence the company's capital structure
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