07 July 2010
there are two model we have studied in ca fina that is... 1)CAPM 2)Growth model both can be used to calculate the current share price both have different basis and assumption, i just want to know which one is best.and whether both can be used in similar situation. Thanks in advance
07 July 2010
thanks for giving me ur such a important view.but as per my thinking. both model have different utility- growth model should be used in a condition where u hav idea abt company distributed n future dividend and also growth rate should also be known and more important company should be dividend paying.if a company not paying dividend how one can make calculation.
And in this case CAPM model can be used as its not require to know the company growth rate in paying dividend.
and if we can use Both model then CAPM shuld be used as it also takes risk calculation into consideration.
fianly i conclude CAPM for non dividend paying stock GROWTH FOR dividend paying stock
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