IGNOU BCOE 143 2025 2026 - How is the valuation of firms done based on dividends?

Question

How is the valuation of firms done based on dividends?

16 Nov 2025

Answer :

Word Count : 333

Valuation of firms based on dividends is a fundamental approach in financial management that focuses on estimating the intrinsic value of a company through its expected future dividend payments. This method is primarily grounded in the premise that the value of a firm is the present value of all future cash flows distributed to its shareholders, specifically in the form of dividends. One widely used model for this purpose is the Dividend Discount Model (DDM). In its simplest form, the model assumes that dividends are expected to grow at a

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