Question

Which of the following models directly values all of the firmʹs equity, rather than a single share?

I. Dividend-discount model
II. Total payout model
III. Discounted cash flow model

Answer 1

The Total payout model directly values all of a firm's equity, while the Dividend-Discount model and Discounted Cash Flow model value a single share.

Step-by-step explanation:

The model that directly values all of a firm's equity, rather than a single share, is the Total payout model. This model evaluates the entire equity of a firm by considering all forms of cash payouts to shareholders, such as dividends, share repurchases, and debt repayments.

On the other hand, the Dividend-Discount model and the Discounted Cash Flow model focus on valuing a single share of a company's equity by calculating the present value of expected future dividends or cash flows.