An Extension of 'Dividend Policy, Growth, and the Valuation of Shares' by Miller and Modigliani

Miller and Modigliani (1961) consider valuation of infinite horizon firms that may not engage in purchasing their own shares. While their fundamental valuation approach applies also to firms that purchase their own shares, their stream of dividends approach does not. The latter approach is modified so that it can be used for valuation of infinite horizon firms including those which may purchase their own shares. The modified approach is the natural extension of the traditional dividend stream approach used for valuing finite horizon firms. Moreover, it is proved to be equivalent to the fundamental valuation approach