A. Write out the equation of corporate value model, and why there is a need of corporate value model for valuing stocks, when you can easily use the dividend model?

Fundamentals of Financial Management, Concise Edition (MindTap Course List)
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ISBN:9781305635937
Author:Eugene F. Brigham, Joel F. Houston
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Chapter9: Stocks And Their Valuation
Section: Chapter Questions
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A. Write out the equation of corporate value model, and why there is a need of corporate value model for valuing stocks, when you can easily use the dividend model?

 

B. Being a stock holder of Ghani Glass limited, a very well-known company listed in the Karachi Stock Exchange 100 index, you are keen to fairly determine the value of stock. Given the following information, what is Ghani Glass Limited value per share?        

 

The free cash flow of the company is expected to be negative -3 Million (Rs. 3,000,000) for first year, 6 Million (Rs. 6,000,000) for second year, 12 Million (Rs. 12,000,000) for third year, and 20 Million (Rs. 12,000,000) for the fourth year.

 

The long-term growth after year 4 is expected to be 3%, and the rate of return is 8%.

 

The company has Rs. 50 Million in the debt and at present there are 5 Million shares of the company

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