What is the Gordon Growth Model? - ANSWERSa model that uses the current dividend paid, the
expected growth rate of dividends, and the required return on equities to calculate the price of a stock
(Next Yr Div/(cost of equity - growth rate of div))
What is the excess earnings model? - ANSWERSUses 2 rates, one for Intangible, one for Tangible.
Tangible rate = Capitalized cash flow rate of return
When Should DCF be used? - ANSWERSThe company's performance is not currently at a normalized level
What is the difference between rates in Excess earnings method? - ANSWERSIntangibles tend to be
higher as they are riskier
What is the difference between DCF and CCF? - ANSWERSCCF is single-period, steady cash flows
What is the main different between Invested Capital and Direct Equity formulas? - ANSWERSInvested
Capital uses WACC, Direct uses equity discount rate
What is the formula for Excess earnings - ANSWERS((Earnings attributable to return on assets)/(Rate of
cap for earnings of net tangible assets))/((earnings in excess of return on assets)/(rate of cap for
intangible assets))
What are the differences between Cash Flow to Equity and Cash Flow to Invested Capital -
ANSWERSEquity subtracts repayments of debt and adds borrowings. Invested Capital does not and adds
Interest expense
What is the formula for Cash flow to invested capital - ANSWERSNormalize net income + interest + non-
cash items - incremental debt free QC + Anticipated Capital expenditures
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller Bensuda. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $7.99. You're not tied to anything after your purchase.