(See related pages)
Common stock valuation is one of the most challenging tasks in financial analysis. A fundamental assertion of finance holds that the value of an asset is based on the present value of its future cash flows. Accordingly, common stock valuation attempts the difficult task of predicting the future. Consider that the dividend yield for a typical large-company stock might be about 2 percent. This implies that the present value of dividends to be paid over the next 10 years constitutes only a portion of the current stock price. Thus, much of the value of a typical stock is derived from dividends to be paid more than 10 years away!
|
|
|