dividend basis valuationownership of shares in

Question

Dividend Basis Valuation

Ownership of shares in entities - The owner to obtain a cash flow consisting of future dividends and the value of a share must correspond to the recent value of this future cash flow.  The shareholder cannot expect cash flows in perpetuity as he will sell his shares at once.

          Po =   D_o/K_e

Note:   Whereas there is growth in equity,  P₀ = d₀ (1+g)/ (k_e-