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Discounted dividend model (DDM) |
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Definition of Discounted dividend model (DDM)Discounted dividend model (DDM)A formula to estimate the intrinsic value of a firm by figuring the
Related Terms:economic components modelAbramsâ€™ model for calculating DLOM based on the interaction of discounts from four economic components. Gordon modelpresent value of a perpetuity with growth. log size modelAbramsâ€™ model to calculate discount rates as a function of the logarithm of the value of the firm. QMDM (quantitative marketability discount model)model for calculating DLOM for minority interests r the discount rate Arbitrage-free option-pricing modelsYield curve option-pricing models. Asset pricing modelA model for determining the required rate of return on an asset. Asset pricing modelA model, such as the Capital Asset Pricing model (CAPM), that determines the required Binomial option pricing modelAn option pricing model in which the underlying asset can take on only two Black-Scholes option-pricing modelA model for pricing call options based on arbitrage arguments that uses Capital asset pricing model (CAPM)An economic theory that describes the relationship between risk and Cash dividendA dividend paid in cash to a company's shareholders. The amount is normally based on Constant-growth modelAlso called the Gordon-Shapiro model, an application of the dividend discount Cum dividendWith dividend. Cumulative dividend featureA requirement that any missed preferred or preference stock dividends be paid Deterministic modelsLiability-matching models that assume that the liability payments and the asset cash Discounted basisSelling something on a discounted basis is selling below what its value will be at maturity, Discounted cash flow (DCF)Future cash flows multiplied by discount factors to obtain present values. Discounted payback period ruleAn investment decision rule in which the cash flows are discounted at an DividendA dividend is a portion of a company's profit paid to common and preferred shareholders. A stock Dividend clawbackWith respect to a project financing, an arrangement under which the sponsors of a project Dividend clienteleA group of shareholders who prefer that the firm follow a particular dividend policy. For Dividend discount model (DDM)A model for valuing the common stock of a company, based on the Dividend growth modelA model wherein dividends are assumed to be at a constant rate in perpetuity. Dividend limitationA bond covenant that restricts in some way the firm's ability to pay cash dividends. Dividend payout ratioPercentage of earnings paid out as dividends. Dividends per shareAmount of cash paid to shareholders expressed as dollars per share. Dividend policyAn established guide for the firm to determine the amount of money it will pay as dividends. Dividend rateThe fixed or floating rate paid on preferred stock based on par value. Dividend reinvestment plan (DRP)Automatic reinvestment of shareholder dividends in more shares of a Dividend rightsA shareholders' rights to receive per-share dividends identical to those other shareholders receive. Dividend yield (Funds)Indicated yield represents return on a share of a mutual fund held over the past 12 Dividend yield (Stocks)Indicated yield represents annual dividends divided by current stock price. Dividends per sharedividends paid for the past 12 months divided by the number of common shares Extra or special dividendsA dividend that is paid in addition to a firm's "regular" quarterly dividend. Extrapolative statistical modelsmodels that apply a formula to historical data and project results for a Ex-dividendThis literally means "without dividend." The buyer of shares when they are quoted ex-dividend Ex-dividend dateThe first day of trading when the seller, rather than the buyer, of a stock will be entitled to Factor modelA way of decomposing the factors that influence a security's rate of return into common and Garmen-Kohlhagen option pricing modelA widely used model for pricing foreign currency options. Homemade dividendSale of some shares of stock to get cash that would be similar to receiving a cash dividend. Index modelA model of stock returns using a market index such as the S&P 500 to represent common or Indicated dividendTotal amount of dividends that would be paid on a share of stock over the next 12 months Liquidating dividendPayment by a firm to its owners from capital rather than from earnings. Market modelThis relationship is sometimes called the single-index model. The market model says that the ModelingThe process of creating a depiction of reality, such as a graph, picture, or mathematical Perfect market view (of dividend policy)Analysis of a decision on dividend policy, in a perfect capital Pie model of capital structureA model of the debt/equity ratio of the firms, graphically depicted in slices of Residual dividend approachAn approach that suggests that a firm pay dividends if and only if acceptable Single factor modelA model of security returns that acknowledges only one common factor. Single index modelA model of stock returns that decomposes influences on returns into a systematic factor, Signaling view (on dividend policy)The argument that dividend changes are important signals to investors Simple linear trend modelAn extrapolative statistical model that asserts that earnings have a base level and Single-index modelRelated: market model Special dividendAlso referred to as an extra dividend. dividend that is unlikely to be repeated. Stochastic modelsLiability-matching models that assume that the liability payments and the asset cash flows Stock dividendPayment of a corporate dividend in the form of stock rather than cash. The stock dividend Tax differential view ( of dividend policy)The view that shareholders prefer capital gains over dividends, Three-phase DDMA version of the dividend discount model which applies a different expected dividend Traditional view (of dividend policy)An argument that "within reason," investors prefer large dividends to Two-factor modelBlack's zero-beta version of the capital asset pricing model. Two-state option pricing modelAn option pricing model in which the underlying asset can take on only two Value-at-Risk model (VAR)Procedure for estimating the probability of portfolio losses exceeding some With dividendPurchase of shares in which the buyer is entitled to the forthcoming dividend. Related: exdividend. Yield curve option-pricing modelsmodels that can incorporate different volatility assumptions along the DividendA payment a company makes to stockholders. Earnings before income tax. The profit a company made Discounted cash flow (DCF)A method of investment appraisal that discounts future cash flows to present value using a discount rate, which is the risk-adjusted cost of capital. DividendThe payment of after-tax profits to shareholders as their share of the profits of the business for an accounting period. Dividend incomeIncome that a company receives in the form of dividends on stock in other companies that it holds. DividendsAmounts paid to the owners of a company that represent a share of the income of the company. discounted cash flow (DCF)Refers to a capital investment analysis technique dividend payout ratioComputed by dividing cash dividends for the year dividend yield ratioCash dividends paid by a business over the most Capital Asset Pricing Model (CAPM)A model for estimating equilibrium rates of return and values of dividend growth methoda method of computing the cost Internet business modela model that involves Binomial modelA method of pricing options or other equity derivatives in Black-Scholes modelThe first complete mathematical model for pricing Markowitz modelA model for selecting an optimum investment portfolio, Discounted cash flowA technique that determines the present value of future cash DividendA payment made to shareholders that is proportional to the number of shares capital asset pricing model (CAPM)Theory of the relationship between risk and return which states that the expected risk cash dividendPayment of cash by the firm to its shareholders. constant-growth dividend discount modelVersion of the dividend discount model in which dividends grow at a constant rate. dividendPeriodic cash distribution from the firm to its shareholders. dividend discount modelComputation of todayâ€™s stock price which states that share value equals the present value of all expected future dividends. dividend payout ratioPercentage of earnings paid out as dividends. ex-dividend dateDate that determines whether a stockholder is entitled to a dividend payment; anyone holding stock before this date is entitled to a dividend. information content of dividendsdividend increases send good news about cash flow and earnings. dividend cuts send bad news. MM dividend-irrelevance propositionTheory that under ideal conditions, the value of the firm is unaffected by dividend policy. percentage of sales modelsPlanning model in which sales forecasts are the driving variables and most other variables are stock dividendDistribution of additional shares to a firmâ€™s stockholders. DividendsProfits paid out to shareholders by a corporation. Preferred Stock Stock that has a claim on assets and dividends of a corporation that are priorto that of common stock. Preferred stock typically does not carry the right to vote. DividendAs the term dividend relates to a corporation's earnings, a dividend is an amount paid per share from a corporation's after tax profits. Depending on the type of share, it may or may not have the right to earn any dividends and corporations may reduce or even suspend dividend payments if they are not doing well. Some dividends are paid in the form of additional shares of the corporation. dividends paid by Canadian corporations qualify for the dividend tax credit and are taxed at lower rates than other income. Discounted Cash FlowTechniques for establishing the relative worth of a future investment by discounting (at a required rate of return) the expected net cash flows from the project. DividendUnlike dividends which are paid to company shareholders, participating insurance policy dividends are not based on the company's overall profits. Rather, they are determined by grouping policies by type and country of issue and looking at how each class contributes to the company's earnings and surplus. Dividend PolicyThis policy governs Canada Life's actions regarding distribution of dividends to policyholders. It's goal is to achieve a dividend distribution that is equitable and timely, and which gives full recognition of the need to ensure the ongoing solidity of the company. It also specifies that distribution to individual policyholders must be equitable between dividend classes and policyholder generations, and among policyholders within any class.
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