Journal of Financial and Quantitative Analysis Vol. 9 No. 6 1974
The Traditional Approach to Valuing Levered-Growth Stocks: A Clarification
Abstract
The traditional valuation framework is unsuited to the task of valuing a growth stock when the capitalization rate is specified in terms of market leverage, simply because it is impossible to maintain a constant ratio of book to market leverage over the growth horizon. This severely limits the usefulness of the traditional model in analyzing the valuation problem. We have proposed a more general form of the model which allows us to show the consistency between M-M's Propositions I and II under growth.
- DOI
- 10.2307/2329733
- Volume
- 9
- Issue
- 6
- Pages
- 1031
- Sources
- crossref openalex