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 .