12. 3: Basic Stock Valuation: Free Cash Flow Valuation Model
Basic Stock Valuation: Free Cash Flow Valuation Model The
recognition that dividends are dependent on earnings, so a reliable
dividend forecast is based on an underlying forecast of the firm's
future sales, costs and capital requirements, has led to an
alternative stock valuation approach, known as the free cash flow
valuation model. The market value of a firm is equal to the present
value of its expected future free cash...
Create a 9-slide presentation in which you analyze cost
accounting practices to make a recommendation about whether or not
to accept a purchase offer at a lower price than normal. You may
either record the presentation or write a 2-3 page supporting
report.
Your analysis for the Controller and Sales Manager is needed to
suggest a different way of calculating the pricing of the pickles
that may be lower. As part of your analysis, address the following
items:
Explain why...
Basic Stock Valuation: Free Cash Flow Valuation
Model
The recognition that dividends are dependent on earnings, so a
reliable dividend forecast is based on an underlying forecast of
the firm's future sales, costs and capital requirements, has led to
an alternative stock valuation approach, known as the free cash
flow valuation model. The market value of a firm is equal to the
present value of its expected future free cash flows:
Free cash flows are generally forecasted for 5 to...
Basic Stock Valuation: Dividend Growth
Model
The value of a share of common stock depends on the cash flows
it is expected to provide, and those flows consist of the dividends
the investor receives each year while holding the stock and the
price the investor receives when the stock is sold. The final price
includes the original price paid plus an expected capital gain. The
actions of themarginal investor determine the equilibrium stock
price. Market equilibrium occurs when the stock's...
We use the dividend valuation model to value the price of the
stock. As an investor how do you get value by investing in a stock?
Why does the stock valuation technique discussed in the module
making sense to you or why not? What about the stock you invested
never paid a dividend?
Three different stock valuation techniques are presented; the
dividend growth model, the free cash flow model, the market
multiple model. While none of these is the most appropriate for
every single company, each is useful for determining the value of
companies with certain characteristics. Pick a company, any
[publicly traded] company, and argue why one of the three models
would be most appropriate for your chosen company