Say you’re valuing a company and have 5 years of historical data and the current book value at the end of the five years is $2 million. Say you then look at what net income was the prior 5 years and apply an equity charge to each year to actually see what RI was and find out that RI each year was negative (implying ROE
Silly question, but why can’t a company grow even if it pays out 100% of earnings as dividends (therefore g=b x ROE = 0 bc nothing is being retained)? Why can’t earnings grow in that case ?
Say i wanted to come in and acquire fool control of this company, can i not include growth in my projections (thus assuming a different dividend policy then the prior regime) and therefore come up with a significantly higher equity value then an analyst who assumes no growth??
Just trying to run through different scenarios in my head, would appreciate anyones help. Thanks!!