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Nurudeen Abolaji

Dividend Valuation Model

Hello ladies and gentlemen,

 

I have observed that when valuing a quoted company using Dividend Valuation Model (DVM) I always have two unknown variables, the cost of equity (Ke) and the Price (P) I intend to arrive at. I get confused at this point because I know fully well that the cost of equity is also calculated by rearranging the DVM. what do I do in this situation, should I use Capital Asset Pricing Model (CAPM) to calculate my Ke and move on? 

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hi Nurudeen Abolaji,
Yes you should calculate cost of equity from CAPM because that's the only method and logical one to follow for valuation.

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