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dc.contributor.authorLazzati, Natalia
dc.contributor.authorMenichini, Amilcar
dc.date.accessioned2013-10-25T17:44:04Z
dc.date.available2013-10-25T17:44:04Z
dc.date.issued2013-07-25
dc.identifier.urihttp://hdl.handle.net/10945/37021
dc.descriptionSSRN-id2280181en_US
dc.description.abstractThis article derives a dynamic model of the rm with endogenous investment and leverage ratio within the framework of the dividend discount model. Our valuation model incorporates both managerial exibility and long-run growth. We derive closed-form solutions for the optimal policies and rm value, which allow us to compute the value of the real options as well as secular growth in a systematic way. A standard parameterization of the model suggests that the value of the real options can account for more than 8% of the market value of equity, while the present value of growth opportunities can represent more than 10% of share price. We also characterize the type of industries where traditional valuation models lead to considerable underpricing of securities.en_US
dc.rightsThis publication is a work of the U.S. Government as defined in Title 17, United States Code, Section 101. Copyright protection is not available for this work in the United States.en_US
dc.titleA Dynamic Approach to the Dividend Discount Modelen_US
dc.typeWorking Paperen_US
dc.contributor.departmentGraduate School of Business & Public Policy (GSBPP)
dc.subject.authorDividend Discount Modelen_US
dc.subject.authorGordon Growth Modelen_US
dc.subject.authorReal Optionsen_US
dc.subject.authorLong-Run Growthen_US
dc.subject.authorDynamic Programmingen_US


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