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The Dividend Discount Model (DDM): The Black Sheep of Valuation?

Brian DeChesare

When I started offering financial modeling training , I never expected to get questions about a methodology like the Dividend Discount Model (DDM). But people who aim for investment banking roles are very much into those bells and whistles, so questions about the DDM and other “exotic” methodologies began rolling in.

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Review the concept of WACC

Andrew Stolz

To calculate WACC, the cost of each capital component will be multiplied by its proportional weight. A firm borrows from banks or bondholders and it has to pay the interest. The formula implies the return an investor expects from a risk-free investment plus the return from the stock in relation to market volatility.

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