shareValUsingThreeStageDDM {stockAnalyst}

Calculate value of a share using three stage Dividend Discount Model (DDM).

Description

In general three-stage version of DDM model, the company is assumed to have three distinct stages of growth and the growth rate of the second stage is typically constant. For example, Stage 1 could assume 20 percent growth for three years, Stage 2 could have 10 percent growth for four years, and Stage 3 could have 5 percent growth thereafter.

Usage

shareValUsingThreeStageDDM(divNot, r, n1, n2, g1, g2, g3)

Arguments

divNot

A number.

r

A number.

n1

A number.

n2

A number.

g1

A number.

g2

A number.

g3

A number.

Details

According to information provided Jerald E. Pinto (2020), the method shareValUsingThreeStageDDMl is developed to compute value of a share using three stage Dividend Discount Model for the values passed to its six arguments. Here, divNot is dollar value of the current dividend, r is required rate of return on equity, n1 is number of years in Stage 1, n2 is number of years in Stage 2, g1 is expected growth rates for the first stage, g2 is expected growth rates for the stage two, and g3 is expected growth rates for the continuing third stage.

Value

Input values to seven arguments divNot , r, n1, n2, g1, g2and g3.

Author(s)

MaheshP Kumar, [e-mail]

References

Pinto, J. E. (2020). Equity Asset Valuation (4th ed.). Wiley Professional Development (P&T). https://bookshelf.vitalsource.com/books/9781119628194

Examples

shareValUsingThreeStageDDM(divNot=1.60,r=0.12,n1=2,n2=5,g1=0.14,g2=0.12,g3=0.102)
shareValUsingThreeStageDDM(divNot=3.30,r=0.09,n1=2,n2=5,g1=0.14,g2=0.12,g3=0.0675)