Module 29.2 LOS 29.h: Pros and Cons of the GGM
Some of the advantages to using the GGM include its applicability to mature, stable firms. The GGM is easy to …
CFA Level II
Module 29.2 LOS 29.e: The PVGO Equation
When a firm has opportunities to earn returns in excess of its required rate of return it should invest in …
Module 29.3 LOS 29.i: Understanding when multistage DDM is applicable
There are different multistage models we often prefer to use to value a company, as the single stage model assumption …
Module 29.2 LOS 29.d: Calculate implied growth rate of dividends using the Gordon Growth Model
We can calculate the implied growth rate of dividends if we know the value of the other 3 variables in …
Module 29.1 LOS 29.a: Compare and understand advantages and disadvantages of dividend, free cash flow and residual income discounted cash flow models
Dividend discount models use dividends paid to shareholders as the valuation cash flow. This can be easily justified, as the …
Module 30.1 LOS 30.n: When FCFE is Preferred, Ownership Perspective Implication of FCFE
The ownership perspective in the free cash flow approach is that of an acquirer who can change the firm’s dividend …
Module 30.2 LOS 30.c: Calculating FCFF and FCFE
The CFA can give us 4 different financial statement items and expect us to make the appropriate adjustments to get …
Module 32.4 LOS 32.h: Residual Income Forecasting with a Persistence Factor
The challenge of using residual income models is that we must forecast residual income indefinitely into the future. However, by …
Module 32.2 LOS 32.c: Residual Income Forecasting
We can use the following equation to forecast the residual income: RIt = Et − (r × Bt − 1) = (ROE …
Module 32.2 LOS 32.d: Fundamental determinants of Residual Income
Using a single-stage residual income model, we can highlight the fundamental drivers of residual income. We can equate B0 to …