Equity Valuation

Question 1

Equity Valuation

Present Value (P0)

Answer 1

P0 = (D1 + P1)/(1 + R)

D1 = Dividend
R = Required return
P1 = Price in one period

Question 2

Cost of Equity / Required Return (Re)

Answer 2

Re = D1/P0 + g

D1 = Dividend
g = Growth rate or Capital Gains Yield
P0 = Present Value