Stock Value Calculator

More about this growth stock value calculator so you can better understand how to use this corporate finance calculator.

How do you compute the value of a stock

As with financial assets, one common way of valuing it is to compute the present value of cash flows associated to the asset. The price of a stock depends on whether it gives dividends or not and whether the dividend value grows or not.

Assuming a that the dividend of the stock grows at a rate of \(g\), with a dividend of \(D\) and a is discount rate of \(r\), the price of the stock is computed sing the following formula:

\[ \text{Stock Value} = \displaystyle \frac{D}{r-g}\]

Observe that this calculator does not indicate the price of the stock, it is rather the value of the stock , considering the present value of all the cash flows associated to it.

Example of the calculation of the value of a stock: Dividend Model

Question: Assume that a firm pays out dividends of $1.34 per share. Assuming a discount rate of 4%, and also under the assumption that the firm has a dividend growth of 2%, compute the value of the stock.

Solution:

This is the information we have been provided with:

• The dividend pay per period is \(D = 1.34\), and the appropriate discount rate per period is \(r = 0.04\) and the dividend growth rate is \(g = 0.02\).

Therefore, the price of the corresponding stock is

: \[ \begin{array}{ccl} P & = & \displaystyle \sum_{n = 1}^{\infty} \frac{D}{(1+r)^n} \\\\ \\\\ & = & \displaystyle \frac{D}{1+r} + \frac{D \times (1+g)}{(1+r)^2} + ... \\\\ \\\\ & = & \displaystyle \frac{D}{r-g} \\\\ \\\\ & = & \displaystyle \frac{1.34}{0.04 - 0.02} \\\\ \\\\ & = & 67 \end{array} \]

Therefore, price for the stock price with zero-growth, a dividend of \(D = 1.34\) and a discount rate of \(r = 0.04\) is \(\text{\textdollar}67\).

Other corporate finance calculator

If instead you are interested in estimating bonds, you can use our bond price solver , or you may also be interest in the special case of Zero Growth Stock Price .