THE PRESENT VALUE THEORY is a widely recognized concept in the field of finance, economics, and mathematics. In reflecting the time value of money, the present value theory and mathematical tables are widely used in the field of finance to determine life insurance premiums, annuity payments, mortgage payments, bond prices and yields, and rates of return on capital budgeting proposals. Although the concept is relatively new to the field of common stock investment, published works on the subject appeared more than twenty-five years ago.' A considerable amount of attention has focused on the application of the present value concept to common stocks, including the development of mathematical formulas, models, and tables, particularly in the last ten years.2 Nevertheless, some financial analysts are skeptical concerning tenets of the present value theory. Normally, present value calculations are applied to projected dividends, but some writers would prefer to base estimates of value on projected earnings. Consequently, the purpose of this article is to examine the role of corporate earnings and dividends in respect to the present value theory, first without consideration of stockholder income taxes, and then with the assumption of several personal income tax and capital gains tax considerations.