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Hello Tutor,for PYQ June 2015 Q3 part(c)
Why sometimes some question using earning valuation model which based on earning after-tax to calculate the company value and sometimes using the dividend valuation model?
When should be using these model and in what situation?
Thank you.It depends on whether we are valuing just the equity (in which case we discount the FCFE at the cost of equity, which is what the dividend valuation model is doing), or whether we are valuing the whole business (equity plus debt) in which case we discount the FCF at the WACC.
I do explain this in my free lectures!!
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