00:01
So here it says ddm.
00:01
And what ddm stands for is a dividend discount model.
00:06
So what this says is that value is equal to the present value of all future dividends, right? so a stock is worth the present value of all the payments the stock is going to make you in the future.
00:20
All future dividends.
00:22
So here the dividends are $8 per year and every year thereafter.
00:26
So we're going to get eight plus eight plus eight plus eight plus eight plus eight plus eight forever.
00:33
But all those eights are not the same, right? and eight in the upcoming year is worth a lot more than $8 you'll get 100 years from now.
00:39
Right? if i get $8 today, i can invest it and earn interest.
00:43
So i'd rather have the $8 today.
00:45
So we need to discount, right? this is where the discount term comes from at rate of return.
00:54
So we require a 7 % rate of return.
00:57
So from our perspective, each year into the future, things are worth 8 % less, right? so in the first year, i get $8, and i assume that's this year.
01:07
But the dollars i get a year from now are worth 7 % less...