{"id":105045,"date":"2021-01-30T16:39:53","date_gmt":"2021-01-30T11:09:53","guid":{"rendered":"https:\/\/www.vskills.in\/certification\/tutorial\/?page_id=105045"},"modified":"2024-04-12T14:28:22","modified_gmt":"2024-04-12T08:58:22","slug":"single-period-valuation-model","status":"publish","type":"page","link":"https:\/\/www.vskills.in\/certification\/tutorial\/single-period-valuation-model\/","title":{"rendered":"Single Period Valuation Model"},"content":{"rendered":"\n<p>When an investor expects to hold the equity share for one year, the price of the equity share will be<\/p>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter\"><img decoding=\"async\" src=\"http:\/\/www.vskills.in\/lms\/wp-content\/uploads\/2016\/06\/Image-41-3.jpg\" alt=\"Image 41\" class=\"wp-image-40117\"\/><\/figure><\/div>\n\n\n\n<p>Where<\/p>\n\n\n\n<p>Po = current price of the equity share<\/p>\n\n\n\n<p>D1 = dividend expected a year hence<\/p>\n\n\n\n<p>P1 = price of the share expected a year hence<\/p>\n\n\n\n<p>r = rate of return required on the equity share<\/p>\n\n\n\n<p><strong>Illustration:<\/strong><\/p>\n\n\n\n<p>Uranus Ltd.\u2019s equity share is expected to provide a dividend of Rs. 2.00 and fetch a price of Rs.18.00 a year hence. What price would it sell for now if the investors\u2019 required rate of return is 12%?<\/p>\n\n\n\n<p>The current price will be<\/p>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter\"><img decoding=\"async\" src=\"http:\/\/www.vskills.in\/lms\/wp-content\/uploads\/2016\/06\/Image-43-3.jpg\" alt=\"Image 43\" class=\"wp-image-40119\"\/><\/figure><\/div>\n\n\n\n<p>If the price of the equity share is expected to grow at a rate of g per cent annually, the current price being Po becomes Po(1+g) a year hence and hence we get<\/p>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter\"><img decoding=\"async\" src=\"http:\/\/www.vskills.in\/lms\/wp-content\/uploads\/2016\/06\/Image-44-2.jpg\" alt=\"Image 44\" class=\"wp-image-40120\"\/><\/figure><\/div>\n\n\n\n<p>On simplifying, we get,<\/p>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter\"><img decoding=\"async\" src=\"http:\/\/www.vskills.in\/lms\/wp-content\/uploads\/2016\/06\/Image-42-3.jpg\" alt=\"Image 42\" class=\"wp-image-40118\"\/><\/figure><\/div>\n\n\n\n<p>Given the current market price and forecast values of dividend and share price, the expected rate of return is equal to<\/p>\n\n\n\n<p>R= D1\/Po + g<\/p>\n","protected":false},"excerpt":{"rendered":"<p>When an investor expects to hold the equity share for one year, the price of the equity share will be Where Po = current price of the equity share D1 = dividend expected a year hence P1 = price of the share expected a year hence r = rate of return required on the equity&#8230;<\/p>\n","protected":false},"author":1,"featured_media":0,"parent":0,"menu_order":0,"comment_status":"closed","ping_status":"closed","template":"","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-105045","page","type-page","status-publish","hentry"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v24.5 - 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