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ddm2st.xls~Y!Two-Stage Dividend Discount Model[This model is designed to value the equity in a firm, with two stages of growth, an initialAperiod of higher growth and a subsequent period of stable growth.AssumptionsL1. The firm is expected to grow at a higher growth rate in the first period.V2. The growth rate will drop at the end of the first period to the stable growth rate.I3. The dividend payout ratio is consistent with the expected growth rate.,The user has to define the following inputs:1. Length of high growth periodB2. Expected growth rate in earnings during the high growth period.73. Dividend payout ratio during the high growth period.D4. Expected growth rate in earnings during the stable growth period.95. Expected payout ratio during the stable growth period.6. Current Earnings per share 7. Inputs for the Cost of EquityInputs to the modelCurrent Earnings per share =
(in currency)Current Dividends per share =-Enter length of extraordinary growth period =
(in years)-Do you want to enter cost of equity directly?No(Yes or No)"If yes, enter the cost of equity =(in percent)-If no, enter the inputs to the cost of equityBeta of the stock =Riskfree rate=
Risk Premium=.Do you want to use the historical growth rate?Yes'If yes, enter EPS from five years ago =+Do you have an outside estimate of growth ?#If yes, enter the estimated growth:;Do you want to calculate the growth rate from fundamentals?#If yes, enter the following inputs:Net Income Currently =Book Value of Equity =Tax Rate on Income=GThe following will be the inputs to the fundamental growth formulation:ROE =Retention =EDo you want to change any of these inputs for the high growth period?HIf yes, specify the values for these inputs (Please enter all variables)GDo you want to change any of these inputs for the stable growth period?,If yes, specify the values for these inputs =Specify weights to be assigned to each of these growth rates:Historical Growth Rate =Outside Prediction of Growth = Fundamental Estimate of Growth =*Enter growth rate in stable growth period?*Stable payout ratio from fundamentals is =(Do you want to change this payout ratio?&If yes, enter the stable payout ratio=-Will the beta to change in the stable period?*If yes, enter the beta for stable period =RBefore reviewing the output, check to see if any warnings appear on the next page.WarningsOutput from the programCost of Equity =Current Earnings per share=!Growth Rate in Earnings per shareGrowth RateWeightHistorical Growth =Outside Estimates =Fundamental Growth =Weighted Average#Payout Ratio for high growth phase=GThe dividends for the high growth phase are shown below (upto 10 years) DividendsGrowth Rate in Stable Phase =Payout Ratio in Stable Phase = Cost of Equity in Stable Phase ="Price at the end of growth phase =1Present Value of dividends in high growth phase =!Present Value of Terminal Price =Value of the stock =Estimating the value of growthValue of assets in place =Value of stable growth =Value of extraordinary growth =
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