Present Value =

Next Year's Value =

Dividends Paid =

Tax Rate =

Expected Rate of Return =

Using projections of next year's stock price, current dividend payouts, taxes on those dividends, and required rate of return, this equation gives the current value of a security.

Contributed by Tave Close.

If a company is expected to sell its stock for $102.50 in one year and is paying a dividend of $10.00 this year at a taxable rate of 40% while investors are demanding 10% on their money, our equation proves that the stock is worth $98.64 today.

Present Value

Next Year's Value

Dividends Paid

Tax Rate

Expected Rate of Return

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