shareValueUsingDDM1yr: Calculates value of a share that is held for a single period (that is one year) using the Dividend Discount Model(DDM).
Description
From the perspective of a shareholder who buys and holds a share of stock, the cash flows he or she will obtain are the dividends paid on it and the market price of the share when he or she sells it. The future selling price should in turn reflect expectations about dividends subsequent to the sale. Assuming an investor wishes to buy a share of stock and hold it for one year, the value of that share of stock today is the present value of the expected dividend to be received on the stock plus the present value of the expected selling price at the end of one year (Jerald E. Pinto, 2020).
Usage
shareValueUsingDDM1yr(dividend1yr, expSharePriceIn1yr, n, r)
Value
Input values to four arguments dividend1yr, expSharePriceIn1yr, n and r.
According to information provided by Jerald E. Pinto (2020), the method shareValueUsingDDM1yr is developed to compute DDM value of share with a single holding period (that is one year) for the values passed to its four arguments. Here, dividend1yr is the expected dividend per share for Year 1, assumed to be paid at the end of the one year, expSharePriceIn1yr is the expected price per share at the end of one year, n is 1 representing that share is held for one year, and r is the discount rate.
References
Pinto, J. E. (2020). Equity Asset Valuation (4th ed.). Wiley Professional Development (P&T). https://bookshelf.vitalsource.com/books/9781119628194