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If This Is Your Problem This May: If You Are Getting Too Low A Value From This Model

The document discusses potential issues with a three stage discounted dividend model, including getting too low a value, an extremely high value, a stable period payout ratio that is too low, a stable period beta that is too high, a stable growth period growth rate that is too high, and a period of high growth and transition that is too high.

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Jozef
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19 views

If This Is Your Problem This May: If You Are Getting Too Low A Value From This Model

The document discusses potential issues with a three stage discounted dividend model, including getting too low a value, an extremely high value, a stable period payout ratio that is too low, a stable period beta that is too high, a stable growth period growth rate that is too high, and a period of high growth and transition that is too high.

Uploaded by

Jozef
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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What is wrong with this model?

(3 stage DDM)
If this is your problem this may
• If you are getting too low a value from this model,
- the stable period payout ratio is too low for a stable firm (< 40%) If using fundamentals,
If entering directly,
- the beta in the stable period is too high for a stable firm Use a beta closer
• If you get an extremely high value,
- the growth rate in the stable growth period is too high for stable firm Use a growth rate
- the period of growth (high + transition) is too high Use shorter high

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