Reading 33, Q15 part A valuation, receive, solution, because, company

ayaz_mahmud369

I see for part A they want the value of the company or the value per share at T=4. Now does this include the PV of all the dividends before T=4 because in the solution they do not add this to the value? Why? In my mind, this whole model is forward looking from T=0 and onwards, why ignore in your valuation at T=4 the value of all the dividends you shall receive up until this date?  
Is the solution incorrect?
Please no condescending answers.

AndyNZ

I think your confusion seems to be around value at the end of year 4 (V4) vs. current value (pv) of the stock. (V0).
If its V4 then to me that’s forward looking for 4th yr. So calc. DPS up to 4th year from spreadsheet forecasting, look at future growth (11.8-0.2 =9.8), factor that into your DDM model.
No need of discounting ($61.76) if thats what you are referring to since question is value at the end of 4th year.
Part B, I believe you agree.

cfalevel2011

RHZ is correct. Think of it this way, if you bought a stock today, you are paying for future dividends you are expecting to receive and not for the dividends already cashed by the seller of the stock. So for value at T=4, the dividends that matter would be D5 onwards.

ramzes

Right, that makes sense!