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The DDM is more grounded because it’s based on the company’s actual distributions and potential future value. And it values the company today based on the present value of its dividends and that potential future value (either the stock price or the Equity Value via the TerminalValue calculation).
The important figure there is r, which we’re using as the discount rate in this whole equation. But here, we use what interest we could get from an alternative investment in the market, called the MarketRate. This is the rate of return you’d get if you invested your money today instead. . You get: Year.
The first of the is as companies scale up, there will be a point where they will hit a growth wall, and their growth will converge on the growth rate for the economy. Put simply, there are very, very few companies that generate big revenues and earn high margins at the same time. It was the reason that I argued at a $1.2
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