Posts tagged: John Burr Williams

Absolute Equity Valuation, Part II: Dividend Discount Model

Introduction: 

In part-1 of this series, we discussed the concept that a stock’s intrinsic value is the present value of its cash flows. Here in part-2 we will introduce the general form of the present value model, and discuss the dividend discount model in more detail. 

The present value model discounts all future cash flows to determine a stock’s present value, V0, which is its intrinsic value at t=0. Discounting all future cash flows necessitates using the infinity sign (∞) in the summation. The foundational formula for the present value model is: Read more »

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