This function computes the intrinsic stock price using the constant growth dividend discount model.
Usage
stock.price(dividend, k = NULL, g = NULL, ROE = NULL, b = NULL,
riskFree = NULL, marketPremium = NULL, beta = NULL)
Value
dividend
expected dividend(s) for the next year(s) (in euros)
k
required rate of return
g
growth rate of dividends
PVGO
present value of growths opportunities
stockPrice
intrinsic stock price
Arguments
dividend
expected dividend(s) for the next year(s) (in euros), separated by commas
k
required rate of return
g
growth rate of dividends
ROE
return on investment
b
plowback ratio
riskFree
riskfree rate
marketPremium
market risk premium
beta
beta
Author
Arto Luoma <arto.luoma@wippies.com>
Details
All the above rates are given in percentages (except the dividends). One should provide either k or the following three: riskFree, marketPremium, beta. Further, one should provide either g or the following two: ROE and b. In the output, k and g are given in decimals.
References
Bodie, Kane, and Marcus (2014) Investments, 10th Global Edition, McGraw-Hill Education, (see Dividend Discount Models in Section 18.3).