stockAnalyst (version 1.0.1)

shareValUsingTwoStageHmodel: Calculates value of share using two stage H-Model that considers half of the length of the super-normal growth period.

Description

The basic two-stage model assumes a constant, extraordinary rate for the super-normal growth period that is followed by a constant, normal growth rate thereafter. The difference in growth rates may be substantial. For instance, the growth rate for the company Carl Zeiss Meditec was 9 percent annually for 10 years, followed by a drop to 5 percent growth in Year 11 and thereafter. In some cases, a smoother transition to the mature phase growth rate would be more realistic (Jerald E. Pinto, 2020).

Usage

shareValUsingTwoStageHmodel(divNot, r, n, H, gS, gL)

Value

Input values to six arguments divNot , r, n, H, gS and gL.

Arguments

divNot

A number.

r

A number.

n

A number.

H

A number.

gS

A number.

gL

A number.

Author

MaheshP Kumar,

Details

According to information provided by Jerald E. Pinto (2020), the method shareValUsingTwoStageHmodel is developed to compute value of share using two stage H-Model for the values passed to its six arguments. Here, divNot is dollar value of the current dividend, r is required rate of return on equity, n is number of years of super-normal growth period, H is which is one-half of n (that is half of the length of the super-normal growth period), gS is initial short-term dividend growth rate, and gL is normal long-term dividend growth rate after Year 2H (that is n).

References

Pinto, J. E. (2020). Equity Asset Valuation (4th ed.). Wiley Professional Development (P&T). https://bookshelf.vitalsource.com/books/9781119628194

Examples

shareValUsingTwoStageHmodel(divNot=0.14, r=0.097,n=10,H=10/2,gS=0.15,gL=0.08)
shareValUsingTwoStageHmodel(divNot=1.37, r=0.10,n=12,H=12/2,gS=0.24,gL=0.06)
shareValUsingTwoStageHmodel(divNot=0.40, r=0.071,n=10,H=10/2,gS=0.09,gL=0.05)