A Unified Valuation Framework for Dividends, Free Cash Flows, Residual Income, and Earnings Growth Based Models

21 Pages Posted: 8 Oct 2008  

Dan Gode

affiliation not provided to SSRN

James A. Ohlson

Hong Kong Polytechnic University - School of Accounting and Finance

Date Written: February 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.

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

Dan Gode (Contact Author)

affiliation not provided to SSRN

No Address Available

James A. Ohlson

Hong Kong Polytechnic University - School of Accounting and Finance ( email )

M715, Li Ka Shing Tower
Hung Hom, Kowloon
China

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