discount model (DDM), the necessary information needed
to conduct equity valuation using the DDM, and give one alternative method of valuation given in your text that can be used if all of the necessary information needed for the DDM valuation is not available.
Solution: DDM model for valuing a share of stock implies
finding the present value of all expected future dividends. Assumptions of this model are discussed below:-
Dividends are expected to occur forever, that is, the
stock provides dividends in perpetuity
Constant growth DDM assumes that dividend growth
is constant and in multistage DDM models can accommodate any number of patterns of future streams of expected dividends.
Supernormal growth occurs only for few years. After
that period of normal growth starts i.e. after that the growth rate cannot equal or exceed the required rate of return.
The investor's required rate of return is both known
and constant. FCFE and Book Value method are alternatives that can be used if DDM valuation is not available.
The Merger & Acquisition Leader's Playbook: A Practical Guide to Integrating Organizations, Executing Strategy, and Driving New Growth after M&A or Private Equity Deals
Finance Secrets of Billion-Dollar Entrepreneurs: Venture Finance Without Venture Capital (Capital Productivity, Business Start Up, Entrepreneurship, Financial Accounting)