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A Unified Valuation Framework for Dividends, Free Cash Flows, Residual Income, and Earnings Growth Based ModelsDhananjay (Dan) K. GodeNew York University (NYU) - Department of Accounting, Taxation & Business Law James A. OhlsonNew York University (NYU) - Leonard N. Stern School of Business; New York University (NYU) - Department of Accounting, Taxation & Business Law February 14, 2006 Abstract: 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, M41 working papers seriesDate posted: February 22, 2006Suggested CitationContact Information
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