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CAPM/Dividend Growth Model
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bro.. pm me if anything.. seems like only the both of us r conversing on this topic.. dun wanna take up bandwidth..
oh u're doing a proj.. okokk.. proj means finance theories..
you may want to search arnd for the 'sustainable growth rate' which supports the gordon growth model stock valuation..
tt wld give u, g = (net income-div)/net income * net income/sales * sales/assets * assets/shareholders' equity
in short, g = earnings retention rate (i.e. 1-div payout ratio) * ROE..
this calculation of g supports the constant growth model for stock valuation i.e. gordon growth model..
may wanna google it for further elaboration.. 
chinton86 ( Date: 14-Oct-2009 17:34) Posted:
| For my project i need to reference some where to say y 5.5% leh
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For my project i need to reference some where to say y 5.5% leh
comes frm investor's own estimation.. finance bks or papers wld say anywhere between 5% to 8% would be a gd gauge.. i'd use 5.5% to 6% for a gd gauge..
chinton86 ( Date: 14-Oct-2009 17:24) Posted:
| where can we get the projected growth rate? Or is i assume anyhow?
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where can we get the projected growth rate? Or is i assume anyhow?
oh 1 more thing... reason being that required rate of return cannot be less than the projected growth rate..
tedlim_me ( Date: 13-Oct-2009 08:33) Posted:
btw bro.. i'm not sure where where u can get risk premium.. risk premium = risk free rate - growth rate... growth rate is supposed to be ur own estimation.. risk free rate, get it frm the rate provided by singapore bonds.. however, if the co. has the bulk of operations of the co. is in china, use the risk free rate of china govt bonds.. Generally, use risk free rate of the particular country's 10 yr bonds (though they may be excessively deflated e.g. sg govt bonds which provides a rate that is excessively low compared to corporate bonds which provides higher returns.. so one way is to use an aggregate of a basket of AAA bonds).. i hope this helps... :)
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tt is true unless u subscribe to credit rating firms.. but sg govt bonds provide yields tt are way too low to actually 'more accurately' portray the stock's expected price.. sorry for the late reply..
chinton86 ( Date: 13-Oct-2009 12:41) Posted:
By finding the basket of AAA bond seems to be difficult as compare to 10 government bond right?
Thanks....U helps.
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By finding the basket of AAA bond seems to be difficult as compare to 10 government bond right?
Thanks....U helps.
btw bro.. i'm not sure where where u can get risk premium.. risk premium = risk free rate - growth rate... growth rate is supposed to be ur own estimation.. risk free rate, get it frm the rate provided by singapore bonds.. however, if the co. has the bulk of operations of the co. is in china, use the risk free rate of china govt bonds.. Generally, use risk free rate of the particular country's 10 yr bonds (though they may be excessively deflated e.g. sg govt bonds which provides a rate that is excessively low compared to corporate bonds which provides higher returns.. so one way is to use an aggregate of a basket of AAA bonds).. i hope this helps... :)
bro.. u still can.. juz that ur denominator will be bigger i.e. required rate of return (use capm) - (- the negative growth rate)... so ur expected px for the stock will be lower.. :)
chinton86 ( Date: 13-Oct-2009 01:31) Posted:
Can anyone help me how to find the expected return using capm though i have a formula but where can i find the risk premium for a company: ke=Rf+B(Premium)
If i have a negative growth rate for dividend, can i still use the dividend growth model to find intrisic value?
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Can anyone help me how to find the expected return using capm though i have a formula but where can i find the risk premium for a company: ke=Rf+B(Premium)
If i have a negative growth rate for dividend, can i still use the dividend growth model to find intrisic value?
