Valuation
Dividend Discount Model
Definition
What is Dividend Discount Model?
A model valuing equity as the present valueThe current worth of money expected in the future after applying a discount rate. of expected future dividends.
Example in practice
How This Looks in Practice
A mature utility is valued using forecast dividends and a required returnThe minimum expected return an investor demands for the time and risk involved..
Keep learning
Related Terms
Valuation
Market Value
The price at which an asset could trade in the market at a given time.
ValuationIntrinsic Value
An estimate of an asset's underlying economic worth based on expected cash flows, assets, or earning power.
ValuationFair Value
An estimate of an asset's appropriate value under specified assumptions or accounting standards.
Capital BudgetingNet Present Value
Present value of expected cash inflows minus present value of expected cash outflows.