## 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, V_{0}, 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 »