Dividend Valuation Model Essay Example | Topics and Well Written Essays - 2000 words

Dividend Valuation Model - Essay ExampleBrown & Medoff, (1988), stated that the dividends that have non become ex dividends are not required for forecasting because they have just been announced. The forecast are also based on the detailed financial models running over 2 to 5 year. This model also assumes the constant growth rate. The method is useful when evaluating then value of a company in the short and medium term, however, in wide term valuation, it may not be suitable but the management can only use this model if the shareholder agree to accept the assumptions that the dividend payout policies depart be maintained for future calculations ( Jensen, &, Ruback, 1983, pp550)..The model has limitation that makes it less appropriate. For example, the model has imitations making it difficult to use for short term forecasting as fence to the long run because the system dividends on the ability to while the order details of host companies have an attitude while most companies use t he associate because it is not subscribed. Most companies also understand that the models Is dependent on the input data. Finally, the divided discount model is also not preferred by former(a) companies because the model omits cash flows (PWC, 2007, 1-50).