THE VALUE OF A FIRM WITH PERIODICALLY CHANGING PROFITABILITY

The Williams-Gordon-Shapiro valuation model is extended so as to allow for fluctuations in both total dividends and the fundamental value of a firm. To this end, the profitability of a firm is supposed to be pe riodically varying. As a consequence, reference is made to a discrete time, linear and periodic system, which is taken into a pair of linear and time invariant systems through a suitable sampling procedure. The extended valuation model, obtained by computing the eigenvectors of t hose systems, is capable of three dynamic behaviors: 1) dividends and the fundamental value grow steadily; 2) dividends fluctuate around a r ising trend, with the fundamental value increasing steadily; 3) both v ariables oscillate, each around its rising trend.