Stock valuation: dividend discount and free cash flow models
Constant growth (solve P₀, D, rₛ or g from D₀ or D₁), non-constant growth with a terminal value, and the free cash flow model: value of operations to intrinsic value per share.
Inputs
Enter three values, then press CPT on the one you want, usually P0.
The value of one share today.
The dividend just paid. Next year's is D1 = D0(1 + g).
The return investors require for the stock's risk (for example from CAPM).
The rate dividends grow forever. Must be below rs.
Press CPT P₀ to value the stock. With the example inputs (D0 = $6.56, rs = 15%, g = 2%), P0 = $51.47.
About this calculator
Value a share of common stock from its expected dividends. Use the constant growth (Gordon) model when dividends grow at one rate forever; it can solve for the price, the dividend, the required return or the growth rate, starting from the dividend just paid (D₀) or next year's dividend (D₁). Use non-constant growth for a period of supernormal growth, or the free cash flow model for firms that pay no dividends.
Formula
P0 = D1rs − g, with D1 = D0(1 + g)
- The required return rₛ must be greater than the long-run growth rate g.
- If you are given the dividend just paid, choose D₀; the calculator grows it one year first.
Rate this calculator
Tap a star