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Cost of equity could be found using my program DVM_Versus_CAPM by either methods, the DVM ( Dividend Valuation Model ) or the CAPM ( Capital asset pricing model ). However, value of the share (Company value) could also be found using my program, if the cost of equity Ke is known, whether assuming a constant dividend where Po = D/Ke or a constant growth g where Po = Do(1+g)/Ke-g. Though, the growth rate g is estimated in two different ways, by using the extrapolating growth formula, based on the past dividend history or by applying the Gordon’s growth model (g = r x b). Projects undertaken by firms will have different risk profiles, and so is the company return required, since it reflect this risk, thus, the DVM model assumptions conflict, and yet the DVM high sensitivity to these assumptions. Nevertheless, using the CAPM (Ke = Rf + Beta(Rm - Rf), the investors will require different rates of return for different projects depending of the risk of each project. Rf is the risk free rate, ( Rm - Rf) is the average risk premium, and Beta is the systematic risk of investment. Beta of the share could be measured or obtained from the commercial information suppliers such as Datastream, and the more volatile the business the higher is Beta. My program DVM_Versus_CAPM will be of a value to ACCA’s students and also to students of Corporate Finance.

Python, 531 lines
 ``` 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 100 101 102 103 104 105 106 107 108 109 110 111 112 113 114 115 116 117 118 119 120 121 122 123 124 125 126 127 128 129 130 131 132 133 134 135 136 137 138 139 140 141 142 143 144 145 146 147 148 149 150 151 152 153 154 155 156 157 158 159 160 161 162 163 164 165 166 167 168 169 170 171 172 173 174 175 176 177 178 179 180 181 182 183 184 185 186 187 188 189 190 191 192 193 194 195 196 197 198 199 200 201 202 203 204 205 206 207 208 209 210 211 212 213 214 215 216 217 218 219 220 221 222 223 224 225 226 227 228 229 230 231 232 233 234 235 236 237 238 239 240 241 242 243 244 245 246 247 248 249 250 251 252 253 254 255 256 257 258 259 260 261 262 263 264 265 266 267 268 269 270 271 272 273 274 275 276 277 278 279 280 281 282 283 284 285 286 287 288 289 290 291 292 293 294 295 296 297 298 299 300 301 302 303 304 305 306 307 308 309 310 311 312 313 314 315 316 317 318 319 320 321 322 323 324 325 326 327 328 329 330 331 332 333 334 335 336 337 338 339 340 341 342 343 344 345 346 347 348 349 350 351 352 353 354 355 356 357 358 359 360 361 362 363 364 365 366 367 368 369 370 371 372 373 374 375 376 377 378 379 380 381 382 383 384 385 386 387 388 389 390 391 392 393 394 395 396 397 398 399 400 401 402 403 404 405 406 407 408 409 410 411 412 413 414 415 416 417 418 419 420 421 422 423 424 425 426 427 428 429 430 431 432 433 434 435 436 437 438 439 440 441 442 443 444 445 446 447 448 449 450 451 452 453 454 455 456 457 458 459 460 461 462 463 464 465 466 467 468 469 470 471 472 473 474 475 476 477 478 479 480 481 482 483 484 485 486 487 488 489 490 491 492 493 494 495 496 497 498 499 500 501 502 503 504 505 506 507 508 509 510 511 512 513 514 515 516 517 518 519 520 521 522 523 524 525 526 527 528 529 530 531``` ```#On the name of ALLAH and may the blessing and peace of Allah #be upon the Messenger of Allah Mohamed Salla Allahu Aliahi Wassalam. #Author : Fouad Teniou #Date : 07/03/09 #version :2.6.1 """ collections module's extras in python 2.6.1 were used in my program, DVMextrapolating DVMgordonsModel and CAPM subclasses of namedtuple Python class provide the cost of equity the calculation of the dividend growth g in two different ways, and the value of the company if the cost of equity Ke is known. I used an utility method and the try/exceptions statements to raise errors """ import math as m from collections import namedtuple class MyError: """ Demonstrate imporper operation on negative number""" def _negativeNumberException(self,*args): """ Utility method to raise a negative number exception""" for item in args: if item <0: raise ValueError,\ " python "C:\Users\Fouad Teniou\Documents\python\DVM_Versus_CAPM7.py" #♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦ #< Ke = 14.0% #♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦ #< Extrapolating Growth Model g = 0.12 #< Cost of equity Ke = 0.14 #< Market value of the share Po = \$13.44 #♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦ #< Gordon's Growth Model g = 0.056 #< Cost of equity Ke = 0.127 #< Market value of the share Po = \$2.68 #♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦ #< Extrapolating Growth Model g = 0.06 #< Cost of equity Ke = 7.5% #< Market value of the share Po = \$17.5 #♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦ #< Gordon's Growth Model g = 0.189 #< Cost of equity Ke = 30.3% #< Market value of the share Po = \$1.77 #♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦ #0.06 #7.5 #0.189 #30.3 #♣♣♣♣♣♣♣♣♣♣♣♣♣♣♣♣♣♣♣♣♣♣♣♣♣♣♣♣♣♣♣♣♣♣♣♣♣♣♣♣♣♣♣ #0.215 #c:\Python26> ########################################################################################## #Version : Python 3.2 #import math as m #from collections import namedtuple #class MyError: # """ Demonstrate imporper operation on negative number""" # def _negativeNumberException(self,*args): # """ Utility method to raise a negative number exception""" # # for item in args: # if item <0: # # raise ValueError("
 Created by Fouad Teniou on Wed, 1 Apr 2009 (MIT)