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This paper presents models of equity valuation where future dividends are assumed to follow a generalized Bernoulli process consistent with the actual dividend payout behavior of many firms. This uncertain dividend stream induces a probability distribution of present value. We show how to calculate the first moment of this distribution using functional equations. As well, we demonstrate how to calculate a confidence interval using Monte Carlosimulation. This first moment and interval allows an analyst to determine whether a stock is overor under-valued.
A crossing family of
segments is a collection of segments each pair of which crosses. Given positive
integers j and k,a(j,k) grid is the union of two pairwise-disjoint
collections of segments (with j and k members, respectively) such that each segment
in the first collection crosses all members of the other. Let c(k) be the least integer such that any planar set
of c(k) points in general position generates a
crossing family of k segments. Also let #(j,k) be the least integer such that any planar set
of #(j,k) points in general position generates a (j,k)-grid. We establish here the
facts 9≤c(3)≤16 and #(1,2)=8.