Equity Stuff

Sustainable Growth Rate

Maximum growth in REVENUE given profitability, asset utilization, retention rate, and leverage. Basically it's the ROE (return on equity) multiplied by the retention ratio.


V = [value of dividend discount model using the long term rate] 
 + [D * H * (Gs - Gl)]

the second component is:
 - today's dividend
 - T/2 
 - Difference between higher and lower rate

Equity Risk Premium based on Macroeconomic analysis

   ERP = (1+inflation rate) * (1+GDP growth) * (1+relative value changes due to P/E changes) -1 + (yield on market index) - (risk free rate)