I have a confusion about understanding the question:
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Could anyone explain to me why we are excluding just paid ¥450?
The intrinsic value of a share is the present value of expected future dividends (based on DDM), not historical dividends.
D0(1+g)/(1+r)n
To add to Fino, you don’t count historical cash flows because the person buying the security will not get those cash flows. Think about if someone told you that a stock paid 1M last year but will have no more cash flows going forward. Would you, a potential buyer pay money for that? It would be worth $0 because the the expected/future cash flows are $0.
So to the above points you value a security based on FUTURE cash flows
Good analogy, thanks!
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This formula is a mystery to me too