^yes H-model is a 2 stage model … with a declining growth assumption
McLeod81 Wrote: ------------------------------------------------------- > mwvt9 Wrote: > -------------------------------------------------- > ----- > > H model is a version of the two stage, no? > > > > EDIT: Can McLeod read my mind??? > > > The answer to your question is Yes. Which question are you ansewing…about the H-model or reading my mind?
mwvt9 Wrote: ------------------------------------------------------- > McLeod81 Wrote: > -------------------------------------------------- > ----- > > mwvt9 Wrote: > > > -------------------------------------------------- > > > ----- > > > H model is a version of the two stage, no? > > > > > > EDIT: Can McLeod read my mind??? > > > > > > The answer to your question is Yes. > > Which question are you ansewing…about the > H-model or reading my mind? The mind reading question. So what is the answer (so I can get back to work)?
But would the H model be used in the case of FCFE? It says FCFE in the question. As far as I know it is a dividend discount model. Can someone correct me please?
mumukada Wrote: ------------------------------------------------------- > damn you guys are fast!!! do you all have a paper > weight on your F5 button or what??? How did you know? But the weight keeps falling and I miss a question or 2. Any permanent solution to this?
Yep, I’m thinking B) and C) are definitely out. You would use the H-model for C) (ie. gradual, linear drop decrease in g) I’m trying to rationalize the barriers to entry thing…thinking that they would experience supernormal growth in a period where they have no competition. At some point, that would take a nose-dive off the cliff I think if a flood of new competitors finally made it in the door. I don’t know…I could see them trying to trick us with some BS like this where we have to incorporate some rational of the industry life cycles or something. I’ll go with A)
how come no one is jumping on the storko train and choosing A? two stages, before and after.
A version of the H model can be used with any discounted cash flow model (ie Dividends, FCFF, FCFE).
A… what is the answer??
I thought any model could be used for Dividends and FCFF or FCFE. You are just using differect cash flows to discount, but I could be wrong wonder.
storko Wrote: ------------------------------------------------------- > how come no one is jumping on the storko train and > choosing A? > two stages, before and after. Why do you think barriers to entry would change? Maybe you can convince me to jump on the train.
storko Wrote: ------------------------------------------------------- > how come no one is jumping on the storko train and > choosing A? > two stages, before and after. Dude…perhaps great Canadiam minds think alike? I’m thinking B) would be too easy. I thought B) would have constand or supernormal growth in the first period anyways? That’s why I went with A), once competition copies the product or finds its way in, that sucker is gonna plunge…and that’s the whole problem with using that assumption that the drop would happen instantaneously, right?
But B starts with a declining phase, so that it stage 1, then there is stable growth phase, stage 2. B is better than A I think. It is likely A need 3 stage model as well. C 3 stage. D 1 stage.
To over come the barrier of entry, you gotta drop the mad Elizabeths. Than after that , you have a steady flow. thats my rationale
mumukada Wrote: ------------------------------------------------------- > The two-stage FCFE model is suitable for valuing > firms that: > > A) are in an industry with significant barriers > to entry. > > B) have very high but declining growth rate in > the initial stage. > > C) have moderate growth in the initial phase that > declines gradually to a stable rate. > > D) are growing at a constant growth rate A. There is nothing that would suggest that barriers to entry would cause there to be two different growth stages. B. There is no second stage here, just one declining growth stage. C. Correct D. Gordon Growth Model
Dude, how can C) be correct? That would be a 3-stager. Initial high-growth, a gradual linear decline, and then BAM, shite LT-growth into infinity…and BEYOND!
how can you use the H model plugging FCFE in the formula?
Mumu what is the answer please?
zimzim78 Wrote: ------------------------------------------------------- > Dude, how can C) be correct? That would be a > 3-stager. Initial high-growth, a gradual linear > decline, and then BAM, shite LT-growth into > infinity…and BEYOND! I think it is saying that you are linear decline right off the bat in stage one.
A …significant barriers to entry => initial high growth but then competitors are bound to enter at some later stage => stable growth