Question

Describe the key differences between DDM, FCF and Residual Income models. BE BRIEF.

Describe the key differences between DDM, FCF and Residual Income models. BE BRIEF.

Homework Answers

Answer #1

The differece between DDM, FCF and Residual Income models are as follows:

Dividend Discount Model (DDM) Free Cash Flow (FCF) Residual Income
1 It predicts the price of stock based of the theory that the present value of the sum of all dividends in future is worth more than that will receive in future. FCF highlights the cash that company will generate after considering the cash outflows. residual income is the income firm generates after accounting the cost of capital.
2. It is used for valuation of the assets. FCF looks at the cash geneation with the firm . This models looks at the economic profitability of the firm rather than accounting profit.
3. It considers the future dividends Only the cash outflow and inflow are considered The data is taken from the financial statements
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
What are the key differences between the Kronig-Penney, Ziman, and Feynman models?
What are the key differences between the Kronig-Penney, Ziman, and Feynman models?
Describe the key differences between a capital budget and an operating budget.
Describe the key differences between a capital budget and an operating budget.
Describe at least 4 key differences between men and women described by Helen Fisher.
Describe at least 4 key differences between men and women described by Helen Fisher.
List three key anatomical differences between the sympathetic and parasympathetic divisions.List three key anatomical differences between...
List three key anatomical differences between the sympathetic and parasympathetic divisions.List three key anatomical differences between the sympathetic and parasympathetic divisions.
A. Explain the differences and similarities between linear opportunity models, probit models and logit models. B....
A. Explain the differences and similarities between linear opportunity models, probit models and logit models. B. Explain the strengths and weaknesses between linear opportunity models, probit models and logit models
what are the similarities and differences between the solow growth and IS-LM models
what are the similarities and differences between the solow growth and IS-LM models
Clearly explain the differences between the Drude and Drude-Sommerfeld models.
Clearly explain the differences between the Drude and Drude-Sommerfeld models.
Discuss key differences between entrepreneurship and small business.
Discuss key differences between entrepreneurship and small business.
Discuss the similarities and differences between the discounted dividend and corporate valuation models.
Discuss the similarities and differences between the discounted dividend and corporate valuation models.
Briefly describe two well-known best methodologies to IP models. Provide a brief comparison of those methodologies...
Briefly describe two well-known best methodologies to IP models. Provide a brief comparison of those methodologies in terms efficiency in solving bigger instance of IP problems.     
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT