MBA NOTES:MBA NOTES

VALUATION OF LONG TERM SECURITIES (SHARE) SHARE: Preferred share (Fixed dividend) Common shre  (No fix dividend) Preferred Share Formula: V P = D P /K P  Vp= Preferr Share Value Dp= Fixed dividend amount Kp= Market rate of return/yield(extra return)/required rate of return COMMON SHARE FORMULA: 1) Genneral formula for common share                      1                               n V=D1/(1+Ke) +...........Dn/(1+Ke) V= Value of common Shares D1= Dividend for first year D2=Dividend for 2nd year D3= Dividend for 3rd year . . . so on Ke=market rate of return 2) COMMON SHARE VALUATION MODELS Constant Growth Model Variable growth Model Constant rate: V=D1/Ke-g g=growth rate According to this model the value of divided amount is increased cash year with a constant rate            ...