I was thinking, when I'm doing a DDM valuation I assume that a certain portion of the cash will be distributed as dividends. In the other hand, at FCFE valuation I just calculate the sum of all cash flow that the firm will have after pay its debts and taxes, but I don't assume that the cash will revert in beneficit of the shareholders, at least not immediately, since the firm can decrease its net debt and not necessary that will increase its market value because markets are not that efficient, specially in the short-term.
So the point is, since I assume that dividends will have immediate effects on the wealth of the shareholders, should I use a discount rate a bit smaller in a DDM valuation than a FCFE? Does it sounds like a good idea for you?
Submitted April 27, 2019 at 11:23AM by CoolBR13 http://bit.ly/2PBeLZI
