Finance & Investment Essay Example | Topics and Well Written Essays - 3250 words

Finance & Investment - Essay Example when the share is underpriced. The valuation model used to estimate the intrinsic value of a share is the present value model. Constant Growth Model is also known as Gordon’s Share Valuation model. It is assumed that dividends will grow at the same rate (g) into the indefinite future and that the discount rate (r) is greater than the dividend growth rate (g). The constant growth assumption may not be realistic in many situations. The growth is dividends may be at varying rates. In this model, the future time period is divided into two different growth segments such as the initial extraordinary growth period and the subsequent constant growth period. That is the flow from period 1 to N which will call V1, and the flow from period N+1 to infinity referred to as V2. Freehold property is an asset, the owners of such property require appropriate evidence about their ownership of the property. The freehold property is a fixed asset held by the owner itself. In this context, it is viewed that whenever the portion of assets increases, then the profitability of the company also goes on increasing. If there is an appreciation in assets, it will automatically lead to increases in profitability of the company as a whole; as a result, increase in profit leads to increase in dividend also. So, it is very clear that there is a direct relation between the increment of assets and thereby a corresponding increment of profits, and finally in dividend also. Moreover, whenever a person becomes the real owner of a freehold property, such a person has the right to undertake either to sell or to provide a lease of such property. â€Å"Taxpayers may seek to infer that the wording "holding investments" connotes passive ownership and argue that extensive personal involvement by the deceased/transferor in the business cannot be classed as "holding investment†. (SVM27580 - Share Valuation Manual: Business Property Relief and Agricultural Property Relief)