A Unified Valuation Framework for Dividends, Free Cash Flows, Residual Income, and Earnings Growth Based Models
Dhananjay (Dan) K. Gode
New York University (NYU) - Department of Accounting, Taxation & Business Law
James A. Ohlson
New York University (NYU) - Leonard N. Stern School of Business; New York University (NYU) - Department of Accounting, Taxation & Business Law
February 14, 2006
Valuation techniques are important to practitioners and academics. Although theoretically equity value equals the present value of expected dividends, in practice, higher-level metrics such as free cash flows, earnings, and book values are used for valuation. This paper helps us understand these metrics by: (1) providing a common and simple theoretical framework that shows how these alternative valuation metrics can be used instead of dividends; (2) using the common framework to provide the theoretical underpinnings of earnings-based valuation.
Number of Pages in PDF File: 21
Keywords: Valuation, Discounting, DDM, DCF, Free Cash Flows, Earnings growth
JEL Classification: G12, G24, G31, M41working papers series
Date posted: February 22, 2006
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