stockAnalyst (version 1.0.1)

shareValueUsingDDMnYrs: Calculates value of a share that is held for multiple holding periods (for n years) using the Dividend Discount Model (DDM).

Description

If an investor plans to hold a share of stock for two years, the value of the share is the present value of the expected dividend in Year 1, plus the present value of the expected dividend in Year 2, plus the present value of the expected selling price at the end of Year 2. For an n-period model, the value of a stock is the present value of the expected dividends for the n periods plus the present value of the expected price at the end of nth period (Jerald E. Pinto, 2020).

Usage

shareValueUsingDDMnYrs(dividend, expSharePriceNyr, times, n, r)

Value

Input values to five arguments dividend , expSharePriceNyr, times, n and r.

Arguments

dividend

A vector.

expSharePriceNyr

A number.

times

A vector.

n

A number.

r

A number.

Author

MaheshP Kumar,

Details

According to information provided by Jerald E. Pinto (2020), the method shareValueUsingDDMnYrs is developed to compute DDM value of share with multiple holding periods (that is for n years) for the values passed to its five arguments. Here, dividend is the expected dividend per share for n years, assumed to be paid at the end each year, expSharePriceNyr is the expected price per share at the end of nth year, times is a vector of number of years ranging from 1 to any specified number of years for which share is being held ,n, for example, n with value of 2 represents that share is held for two years, and r is the required rate of return on the stock.

References

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

Examples

shareValueUsingDDMnYrs(dividend=c(3,3.15),expSharePriceNyr=40,times=c(1,2),n=2,r=0.08)
shareValueUsingDDMnYrs(dividend=c(2,3),expSharePriceNyr=48,times=c(1,2),n=2,r=0.10)
shareValueUsingDDMnYrs(dividend=c(2,2.10,2.20),expSharePriceNyr=20,times=c(1,2,3),n=3,r=0.10)