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Step 4: Discount the Dividends and Terminal Value to Present Value and Add Them This is like the final step of a DCF, but you use the Cost of Equity since the Dividend Discount Model is based on Equity Value, not EnterpriseValue. Note that there is no Equity Value to EnterpriseValue bridge here.
Rf = Risk-freeRate. Rm – Rf) = Equity Market RiskPremium. Cp = Cost of Equity Premium. Discount the Terminal Value. . Add up all the figures you have to arrive at the Net Present Value. DCF is widely used in valuing companies, and it is used widely in valuing stocks as well.
I am no expert on exchange rates, but learning to deal with different currencies in valuation is a prerequisite to valuing companies. That process of risk analysis and estimating riskpremiums starts by understanding why some countries are riskier than others.
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