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picture1_Valuation Methods Pdf 86445 | Valuation Of Equity


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File: Valuation Methods Pdf 86445 | Valuation Of Equity
valuation of equity shares dr v k arora 1 determinants of valuation valuation requires determination of two things 1 estimation of expected future cash inflows expected future expected future share ...

icon picture PDF Filetype PDF | Posted on 14 Sep 2022 | 3 years ago
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           Valuation of Equity Shares
                      Dr. V. K. ARORA
                                                        1
                     DETERMINANTS OF VALUATION
              Valuation requires determination of two things:
 1.  Estimation of Expected Future Cash Inflows, 
            Expected Future        Expected Future Share 
            Dividends              Price
 2.  The Required Rate of Return for these expected cash flows
            Required Rate of Return = Risk free Rate + Risk Premium
                                                                     2
    Differences in valuation for different investors
     WHY?
    • Different Investors are likely to have different 
      estimates of future cash inflows due to 
      different set expectations.
    • Different investors are likely to have different 
      Required Rate of Return because of 
      differences in perceived level of risk and 
      different degrees of risk aversion.
                                                        3
    Valuation Methods/ Techniques
    Several methods of Valuation of Equity Shares 
    and each method is likely to produce a different
    intrinsic value.
    1. Dividend Discount Model/Method
    2. Earnings Capitalisation Method/Model
    3. Relative Valuation Methods/Models
    4. Free Cash Flow Discounting Method
                                                          4
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