mengxu

I would say that although both are affected by the accounting treatments, DDM relies less so than FCFE

DDM requires
1) Dividend
2) growth rate
3) payout ratio
4) ROE
5) required rate of return

whereas FCFE requires aside from the required rate of return
1) NI
2) depreciation (and therefore depreciation methods)
3) FCI
4) WCI
5) Net borrowings
6) tax rate

So the main determining factor is dividend where it doesn't even have to relate to NI as it can be paying a dividend regardless of how accounting treatment determines the NI.



Edited 1 time(s). Last edit at Thursday, May 13, 2010 at 10:58AM by joseph213.