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Equity InvestmentsModule 6 of 6

Equity Valuation: Concepts and Basic Tools

6

Concepts

6

Formulas

1

Decisions

4

Quiz Questions

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Key Concepts

6 concepts covered in this module.

Intrinsic Value

True worth based on fundamentals. Compare to market price: undervalued if V > P.

Dividend Discount Model (DDM)

V = Σ Dt/(1+r)t. Value of stock = PV of all expected future dividends.

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Formulas

6 essential formulas for this module.

Gordon Growth Model

V0 = D1 / (r - g)

Where: D1 = next year dividend, r = required return, g = constant growth

Multi-Stage DDM

V = Σ Dt/(1+r)t + Vn/(1+r)n

Where: Vn = terminal value using Gordon model

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Decision Frameworks

1 decision frameworks to guide your analysis.

When to use DDM vs Multiples?

  • DDM: mature dividend-paying companies, when dividends are predictable
  • Multiples: quick comparison, when detailed forecasting is impractical
  • EV/EBITDA: comparing firms with different leverage

Mind Map

Visual overview of how concepts connect in this module.

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  • 4 exam-style quiz questions with instant scoring
  • Progress tracking across all 6 Equity Investments modules
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Flashcard

Intrinsic Value

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Answer
True worth based on fundamentals. Compare to market price: undervalued if V > P.
Sample 1 of 5
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Company Analysis: Past and Present