Damodaran on Valuation_ Security Analysis for Investment and Corporate Finance ( PDFDrive )

+ Cash and marketable securities

1,484 billion

yen

= Value of equity

22,811 billion

yen

÷ Number of shares 3.61 billion

= Value of equity per share 6,319 yen

Thestockwastradingat5,600yeninNovember2005,atthe
time of this valuation, making it slightly undervalued.

The E Model—A Three-Stage FCFE Model

TheEmodelisdesignedtovaluefirmsthatareexpectedto
gothroughthreestagesofgrowth—an initialphaseofhigh
growth rates, a transitional period where the growth rate
declines,andasteadystateperiodwheregrowthisstable.In
this model, the value of a stock is the present value of
expected freecash flow to equity over allthree stages of
growth:

where

P 0 = Value of equity today

FCFEt= FCFE in yeart

ki= Cost of equity