--%>

How you can predict future evolution of value of shares

Could we suppose that, as we cannot predict the future evolution of the value of shares, a good estimation would be to consider this constant during the next five years?

E

Expert

Verified

Such affirmation is an error. The relation among the value of the shares of various years is: Et = Et-1 (1+Ket) – CFact. The shares value is constant (Et = Et-1) only when CFact = Et-1 Ket. It happens in non-growing perpetuities.

   Related Questions in Corporate Finance

  • Q : Explain the working of breakthrough for

    Explain the working of breakthrough in low-discrepancy sequences used for option valuation.

  • Q : Estimate stock's current price A

    A company currently pays a dividend of $3.75 per share, D0 = 3.75. It is estimated that the company's dividend will grow at a rate of 15% percent per year for the next 2 years, then the dividend will grow at a constant rate of 7% the

  • Q : Relationship between the preferred

    Quetion: A private equity fund invests $100 million into a portfolio company and receives 100% of the preferred stock and 80% of the common stock of the company.  The preferred stock carries a face value of $1

  • Q : Assessing market expectations using CAPM

    Assume that the risk-free rate is 1% and the expected market return is 9%. You are considering purchasing Super Soft stock, which currently sells for $100 a share and will pay its next (annual) dividend of $1.00 exactly one year from today. Super Soft is considered to

  • Q : Problem on annual mortgage payment You

    You just took out a variable-rate mortgage on your new home. The mortgage value is $100,000, the term is 30 years, and initially the interest rate is 8%. The interest rate is fixed for 5 years, after which the time rate will be adjusted according to the prevailing rat

  • Q : Define the term Stock Market crash

    Stock Market Crash was responsible for the Great Depression. Middle class families lost all their savings as they had gambled the market on margin.Those banks which were under the loan ofbrokers’ started removing money out of the savings account

  • Q : Compute the present value of the

    Is this possible to value companies by computing the present value of the Economic Value Added (EVA)?

  • Q : What is the sales of the firm The

    The financial ratios of a firm are as follows. Current ratio = 1.33 Acid-test ratio = 0.80 Current liabilities = 40,000 Inventory turnover ratio = 6  What is the sales of the firm?

  • Q : Abnormal profits based on fundamental

    If it is possible to make abnormal profits based on fundamental analysis, you can conclude that the market is: A) Not weak-form efficientB) Weak-form efficientC) Not semi-strong-form efficientD) Semi-strong-form e

  • Q : Explain the structure

    Our company (A) is going to buy the other company (B). We need to value the shares of B and, thus, we will use three options of the structure Debt/Shareholders’ Equity in order to obtain the WACC as: 1) Present structure of A