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Pascal edited section_textit_DDM_textit_RIM__.tex
almost 8 years ago
Commit id: feee3a57dde95703b40ff73dc8053f60a660e884
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In other words, R is what you earn if you pay $V_{0}$, receive $C_{1}$,$C_{2}$, . . . $C_{K}$ and sell the asset at
$V_{K}$. The value of the asset when you sell it is the terminal value of the asset. This basic principle is at the root of many equity valuation models; the \textit{DDM} is the exact translation of this accounting principle where dividends are the revenues a shareholder is entitled to.
\subsection{The \textit{DDM}}
$EV_{t}=\displaystyle\sum_{i=t+1}^{t+K}\frac{FCFF_i}{(1+R)^i}+EV_{t+K}$