0
$\begingroup$

I am implementing an AEG model based off Ohlson (2005). The formula is as follows:

$$ V_0 = \frac{E_t}{k} + \sum_{t=1}^n{\frac{1/k * (E_{t+1} - (1+k)E_t+kD_t)}{(1+k)^t}} $$

I'm debating how share repurchases impact my formulation of D. I've read conflicting views.

Stowe proves mathematically that you should not need to include share repurchases:

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1051281

Damodaran shows how it is essential to include share repurchases to get reasonable numbers (page 336):

http://people.stern.nyu.edu/adamodar/pdfiles/val3ed/c13.pdf

Should I include share repurchases in my DPS number or not, and are analyst per-share consensus estimates also expected to also include capital transactions?

$\endgroup$

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Browse other questions tagged or ask your own question.