Fusion Acquisition Corp. II (FSNB) Simple Dividend Discount Model

Fusion Acquisition Corp. II

FSNB (NYSE)

(%)

Models
Fusion Acquisition Corp. II Simple Dividend Discount Model

# Render description block
model.render_description({
    "data": r"""
## Simple Dividend Discount Model

This model estimates the value of companies that have reached maturity and pay stable dividends as a significant percentage of their **free cash flow to equity**, with no share buybacks or high growth expectancy.

### Fair Value Formulas

`Fair Value` = `Next Year's Expected Dividend` / (`
Discount Rate` - `Growth In Perpetuity`)

`Next year's expected dividend` = `Current Dividend per Share` * (1 + `Growth In Perpetuity`)

> This model was inspired by Prof. Aswath Damodaran's spreadsheet [⬇️ddmst.xls](https://pages.stern.nyu.edu/~adamodar/pc/ddmst.xls)

> Learn more: Prof. Aswath Damodaran's [Guide to Dividend Discount Models](https://pages.stern.nyu.edu/~adamodar/pdfiles/valn2ed/ch13.pdf)
""",
    "properties": {
        "width": "responsive"
    }
})

# --- Assumptions
assumptions.set({
    "timeseries": "annual",
    "data": {
        "#historicalYears": """
            3
        """,
        "#forecastYears": """
            5
        """,
        "#beta": """
            profile:beta
        """,
        "%riskFreeRate": """
            treasury:year10
        """,
        "%equityRiskPremium": """
            risk:totalEquityRiskPremium
        """,
        "%discountRate": """
            assumption:%riskFreeRate + assumption:#beta * assumption:%equityRiskPremium
        """,
        "%growthInPerpetuity": """
            2.5%
        """,
        "#expectedDividend": """
            dividend:adjDividend * (1 + assumption:%growthInPerpetuity)
        """,
    },
    "titles": {
        "#historicalYears": "Historical Years",
        "#forecastYears": "Forecast Years",
        "#beta": "Beta",
        "%riskFreeRate": "Risk Free Rate",
        "%equityRiskPremium": "Equity Risk Premium",
        "%discountRate": "Discount Rate",
        "%growthInPerpetuity": "Growth In Perpetuity",
        "#expectedDividend": "Expected Dividend",
    },
    "properties": {
        "width": "responsive",
        "title": "Assumptions",
        "id": "component-2",
        "bindTo": None
    },
    "descriptions": {
        "#historicalYears": r"""
The number of years of historical data used to calculate averages and trends for analysis.
        """,
        "#forecastYears": r"""
The number of years into the future for which the analysis projects financial performance and metrics.
        """,
        "#beta": r"""
Beta measures the volatility of a stock's price in relation to the overall stock market. A higher beta indicates greater price fluctuations relative to the market.
        """,
        "%riskFreeRate": r"""
The risk-free rate represents the return an investor expects from an absolutely risk-free investment over a specified time period. By default, it is set to the current yield of the U.S. 10-Year Treasury Bond.
        """,
        "%equityRiskPremium": r"""
The market risk premium is the additional return over the risk-free rate expected by investors for equity risk.
        """,
        "%discountRate": r"""
`Discount Rate` = `Cost of Equity` = `Risk Free Rate` + `Beta` * `Market Premium`

The cost of equity is the theoretical rate of return that an equity investment should generate. It is calculated using the CAPM formula.

[Read More](https://www.investopedia.com/terms/c/costofequity.asp#mntl-sc-block_1-0-20)
        """,
        "%growthInPerpetuity": r"""
The stable rate at which the company's book value is assumed to grow in perpetuity.
        """,
        "#expectedDividend": r"""
The estimated annual dividend per share for the next year.
        """,
    },
    "hierarchies": [
        {
            "parent": "%discountRate",
            "children": [
                "#beta",
                "%riskFreeRate",
                "%equityRiskPremium",
            ]
        },
    ]
})

# --- Fair Value Calculation
data.compute_results({
    "#fairValue": """
        assumption:#expectedDividend / ( assumption:%discountRate - assumption:%growthInPerpetuity)
    """,
}, timeseries="annual")

model.render_results({
    "timeseries": "annual",
    "data": {
        "dividend:adjDividend": {
            "label": "Current dividend per share",
            "type": "$"
        },
        "assumption:%growthInPerpetuity": {
            "label": "Growth In Perpetuity",
            "type": "%"
        },
        "assumption:#expectedDividend": {
            "label": "Next year's expected dividend",
            "type": "$"
        },
        "assumption:%discountRate": {
            "label": "Cost of Equity (Discount Rate)",
            "type": "%"
        },
        "result:#fairValue": {
            "label": "Fair Value",
            "type": "$"
        },
    },
    "properties": {
        "title": "Fair Value Calculation",
        "width": "responsive",
        "hidden_keys": []
    }
})

# --- Forecast Dividends
data.compute({
    "income:eps": """
        income:eps:-1 * (1 + assumption:%growthInPerpetuity)
    """,
    "dividend:adjDividend": """
        dividend:adjDividend:-1 * (1 + assumption:%growthInPerpetuity)
    """,
}, forecast=data.get("""
    assumption:#forecastYears
"""), timeseries="annual")

model.render_chart({
    "timeseries": "annual",
    "data": {
        "income:eps": "Earnings per Share",
        "dividend:adjDividend": "Dividend per Share",
    },
    "start": -5,
    "end": data.get("""
        assumption:#forecastYears
    """),
    "properties": {
        "title": "Forecast Dividends",
        "include_ltm": True,
        "set_editable": [],
        "hidden_keys": [],
        "bar_keys": [],
        "width": "full"
    }
})

# --- Fair Value
model.set_final_value({
    "value": data.get("""
        result:#fairValue
    """, timeseries="annual"),
    "units": "$",
    "title": "Fair Value",
    "properties": {
        "width": "responsive" 
    }
})

# Render description block
model.render_description({
    "data": r"""
## Understanding the Calculations

The **Free Cash Flow to Equity** represents the cash available to the common shareholders to be paid out as dividends or used for share buybacks.

`Free Cash Flow to Equity` = `Free Cash Flow to the Firm` + `Net Borrowing`

For the Dividend Discount Model to be appropriate, the FCFE payout ratio should represent a significant portion of FCFE, typically over 50%.

`FCFE Payout Ratio` = `Total Dividends Paid` / `Free Cash Flow to Equity`
""",
    "properties": {
        "width": "responsive"
    }
})

# --- FCFE vs. Dividends
data.compute({
    "user:netBorrowing": """
        balance:totalDebt - balance:totalDebt:-1
    """,
    "user:freeCashFlowToEquity": """
        flow:freeCashFlow + user:netBorrowing
    """,
    "user:totalDividendsPaid": """
        dividend:adjDividend * income:weightedAverageShsOut
    """,
    "user:%fcfePayoutRatio": """
        user:totalDividendsPaid / user:freeCashFlowToEquity
    """,
}, forecast=0, timeseries="annual")

model.render_table({
    "timeseries": "annual",
    "data": {
        "flow:freeCashFlow": "Free Cash Flow to the Firm",
        "user:netBorrowing": "Net Borrowing",
        "user:freeCashFlowToEquity": "Free Cash Flow to Equity (FCFE)",
        "user:totalDividendsPaid": "Total Dividends Paid",
        "user:%fcfePayoutRatio": "FCFE Payout Ratio",
    },
    "start": data.get("""
        -assumption:#historicalYears
    """),
    "end": 0,
    "properties": {
        "title": "FCFE vs. Dividends",
        "order": "descending",
        "number_format": "M",
        "include_ltm": True,
        "display_averages": False,
        "width": "responsive"
    }
})

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Simple Dividend Discount Model

This model estimates the value of companies that have reached maturity and pay stable dividends as a significant percentage of their free cash flow to equity, with no share buybacks or high growth expectancy.

Fair Value Formulas

Fair Value = Next Year's Expected Dividend / (Discount Rate - Growth In Perpetuity)

Next year's expected dividend = Current Dividend per Share * (1 + Growth In Perpetuity)

This model was inspired by Prof. Aswath Damodaran's spreadsheet ⬇️ddmst.xls

Learn more: Prof. Aswath Damodaran's Guide to Dividend Discount Models

Simple Dividend Discount Model

Fair Value Formulas

Discounted Cash Flow to Firm - Perpetual Growth

Earnings Power Value

Simple Dividend Discount Model

Simple Excess Return Model

Two-Stage Dividend Discount Model

Two-Stage Excess Return Model

Discounted Cash Flow to Firm - Exit Multiple

Discounted Future Market Cap

Peter Lynch Fair Value

Altman Z-Score

Beneish M-Score

Capital Asset Pricing Model (CAPM)

Margin Analysis

Piotroski F-Score

Return on Invested Capital (ROIC)

Shiller PE (CAPE) Ratio

Weighted Average Cost of Capital (WACC)

Market is Open

After-Hours Quote

Market is Open

After-Hours Quote

Fusion Acquisition Corp. II Simple Dividend Discount Model

Simple Dividend Discount Model

Fair Value Formulas

Discounted Cash Flow to Firm - Perpetual Growth

Earnings Power Value

Simple Dividend Discount Model

Simple Excess Return Model

Two-Stage Dividend Discount Model

Two-Stage Excess Return Model

Discounted Cash Flow to Firm - Exit Multiple

Discounted Future Market Cap

Peter Lynch Fair Value

Altman Z-Score

Beneish M-Score

Capital Asset Pricing Model (CAPM)

Margin Analysis

Piotroski F-Score

Return on Invested Capital (ROIC)

Shiller PE (CAPE) Ratio

Weighted Average Cost of Capital (WACC)