21 Pages Posted: 8 Oct 2008
Date Written: February 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.
Suggested Citation: Suggested Citation
Gode, Dan and Ohlson, James A., A Unified Valuation Framework for Dividends, Free Cash Flows, Residual Income, and Earnings Growth Based Models (February 2006). NYU Working Paper No. DHANANJAY (DAN) K. GODE-03. Available at SSRN: https://ssrn.com/abstract=1280701