Strayer fin534 discussions week 4
To value a share of TFC’s stock using the growth model method, we need to calculate the present value of future cash flows. First, we must determine the company’s expected dividends (D1) over a period of time and then discount those dividends at an appropriate rate (r). For example:
Present Value = D1/(1 + r)^1 + D2/(1 + r)^2+ …..
Once we have calculated the present value, we can compare it to TFC’s current trading price in order to determine whether or not it is currently undervalued or overvalued. If the calculated present value is higher than the current trading price then it may be considered undervalued, while if it is lower than the current trading price then it may be considered overvalued.