Examlex
There are three valuation methods that reflect historical values: acquisition cost,adjusted acquisition cost,and present value of cash flows using historical interest rates.For each of three methods discuss what the valuation represents and provide an example of a balance sheet item that is valued using the method.In addition,for each of the three methods valuation methods explain its advantages and disadvantages.
Constant-Growth DDM
A dividend discount model that assumes a constant rate of dividend growth indefinitely, used to estimate the value of a stock.
CAPM
The Capital Asset Pricing Model is a formula that describes the relationship between the expected return of an investment and its risk, used to estimate a security's expected return based on its beta and the market's expected return.
Market Capitalization Rate
The Market Capitalization Rate refers to the expected rate of return on an investment or project, derived from the market price of a company's shares.
Risk-Free Rate
The theoretical rate of return of an investment with zero risk, helping in the calculation of the risk premium of various assets.
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