stock.price: Computing stock prices

In RcmdrPlugin.RiskDemo: R Commander Plug-in for Risk Demonstration

Computing stock prices

Description

This function computes the intrinsic stock price using the constant growth dividend discount model.

Usage

stock.price(dividend, k = NULL, g = NULL, ROE = NULL, b = NULL, 
  riskFree = NULL, marketPremium = NULL, beta = NULL)

Arguments

dividend	expected dividend(s) for the next year(s) (in euros), separated by commas
k	required rate of return
g	growth rate of dividends
ROE	return on investment
b	plowback ratio
riskFree	riskfree rate
marketPremium	market risk premium
beta	beta

Details

All the above rates are given in percentages (except the dividends). One should provide either k or the following three: riskFree, marketPremium, beta. Further, one should provide either g or the following two: ROE and b. In the output, k and g are given in decimals.

Value

dividend	expected dividend(s) for the next year(s) (in euros)
k	required rate of return
g	growth rate of dividends
PVGO	present value of growths opportunities
stockPrice	intrinsic stock price

Author(s)

Arto Luoma <[e-mail]>

References

Bodie, Kane, and Marcus (2014) Investments, 10th Global Edition, McGraw-Hill Education, (see Dividend Discount Models in Section 18.3).

Examples

  stock.price(dividend=c(1),k=12,g=10)
  stock.price(dividend=c(1),ROE=50,b=20,riskFree=5,marketPremium=8,
              beta=90)

RcmdrPlugin.RiskDemo documentation built on June 22, 2024, 7:06 p.m.