Transcription of CHAPTER 6 Common Stock Valuation - by Jan Röman
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CHAPTER 6 Common Stock Valuation - by Jan Röman
CHAPTER 6. Common Stock Valuation A fundamental assertion of finance holds that a security's value is based on the present value of its future cash flows. Accordingly, Common Stock Valuation attempts the difficult task of predicting the future. Consider that the average dividend yield for large-company stocks is about 2 percent. This implies that the present value of dividends to be paid over the next 10 years constitutes only a fraction of the Stock price. Thus, most of the value of a typical Stock is derived from dividends to be paid more than 10 years away! As a Stock market investor, not only must you decide which stocks to buy and which stocks to sell, but you must also decide when to buy them and when to sell them. In the words of a well- known Kenny Rogers song, You gotta know when to hold em, and know when to fold em. This task requires a careful appraisal of intrinsic economic value. In this CHAPTER , we examine several methods commonly used by financial analysts to assess the economic value of Common stocks .
CHAPTER 6 Common Stock Valuation A fundamental assertion of finance holds that a security’s value is based on the present value of its future cash flows.
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