Table of Contents

Stock Valuation Models: Part 2 In part 1 of this guide to stock valuation models for the Discounted Cash Flow (DCF) methodology, you have learned how to estimate the future cash flows of the company by considering the forecast period and its terminal value. Part 2 is a continuation of the DCF model, where we delve into the final two steps needed to complete the analysis. Moreover, there will be an introduction of a simpler version of stock valuation known as the Dividend Discount Model or DDM for short Key Stock Valuation Model: Discounted Cash Flow (DCF) Step 2: Choose a Discount Rate, r Once you have determined a good estimation of the company’s cash flows for the next few years (Step 1), and an appropriate terminal value (Step 1.5), the next step is to pick a discount rate. The discount rate...