FINANCIAL THEORY
THE DIVIDEND THEORY
If a change in dividend policy is to have no effect on share value this change must cause an equal but opposite change in the expected capital gain component of total return.
THE EFFICIENT MARKET HYPOTHESIS
THE WEAK FORM
All historical price information is incorporated into current share prices.
THE SEMI-STRONG FORM
All published financial information is already included in the current share price.
THE STRONG FORM
Current prices reflect all the available information which could be known.
DISCOUNTING AND
THE VALUE BONDS
DISCOUNTED CASH FLOW
NET PRESENT VALUE
THE COST OF CAPITAL
DIVIDEND GROWTH MODEL
CAPITAL ASSET PRICING MODEL
CALCULATING WACC
The value of the company is determined
by the NPV of its future cash flows