1、,Chapter 5,Fundamentals of Corporate Finance Third Edition,Valuing Stocks,Brealey Myers Marcus slides by Matthew Will,下载更多培训资料，尽在http:/,Irwin/McGraw-Hill,Topics Covered,Stocks and the Stock Market Book Values, Liquidation Values and Market Values Valuing Common Stocks Simplifying the Dividend Discou
2、nt Model Growth Stocks and Income Stocks,下载更多培训资料，尽在http:/,Stocks & Stock Market,Primary Market - Place where the sale of new stock first occurs. Initial Public Offering (IPO) - First offering of stock to the general public. Seasoned Issue - Sale of new shares by a firm that has already been through
3、 an IPO,下载更多培训资料，尽在http:/,Stocks & Stock Market,Common Stock - Ownership shares in a publicly held corporation. Secondary Market - market in which already issued securities are traded by investors. Dividend - Periodic cash distribution from the firm to the shareholders. P/E Ratio - Price per share d
4、ivided by earnings per share.,Stocks & Stock Market,Stocks & Stock Market,Book Value - Net worth of the firm according to the balance sheet. Liquidation Value - Net proceeds that would be realized by selling the firms assets and paying off its creditors. Market Value Balance Sheet - Financial statem
5、ent that uses market value of assets and liabilities.,Valuing Common Stocks,Expected Return - The percentage yield that an investor forecasts from a specific investment over a set period of time. Sometimes called the holding period return (HPR).,Valuing Common Stocks,The formula can be broken into t
6、wo parts.Dividend Yield + Capital Appreciation,Valuing Common Stocks,Dividend Discount Model - Computation of todays stock price which states that share value equals the present value of all expected future dividends.H - Time horizon for your investment.,Valuing Common Stocks,ExampleCurrent forecast
7、s are for XYZ Company to pay dividends of $3, $3.24, and $3.50 over the next three years, respectively. At the end of three years you anticipate selling your stock at a market price of $94.48. What is the price of the stock given a 12% expected return?,Valuing Common Stocks,ExampleCurrent forecasts
8、are for XYZ Company to pay dividends of $3, $3.24, and $3.50 over the next three years, respectively. At the end of three years you anticipate selling your stock at a market price of $94.48. What is the price of the stock given a 12% expected return?,Valuing Common Stocks,If we forecast no growth, a
9、nd plan to hold out stock indefinitely, we will then value the stock as a PERPETUITY.,Assumes all earnings are paid to shareholders.,Valuing Common Stocks,Constant Growth DDM - A version of the dividend growth model in which dividends grow at a constant rate (Gordon Growth Model).Given any combinati
10、on of variables in the equation, you can solve for the unknown variable.,Valuing Common Stocks,ExampleWhat is the value of a stock that expects to pay a $3.00 dividend next year, and then increase the dividend at a rate of 8% per year, indefinitely? Assume a 12% expected return.,Valuing Common Stock
11、s,Example- continuedIf the same stock is selling for $100 in the stock market, what might the market be assuming about the growth in dividends?,AnswerThe market is assuming the dividend will grow at 9% per year, indefinitely.,Valuing Common Stocks,If a firm elects to pay a lower dividend, and reinve
12、st the funds, the stock price may increase because future dividends may be higher.Payout Ratio - Fraction of earnings paid out as dividends Plowback Ratio - Fraction of earnings retained by the firm.,Valuing Common Stocks,Growth can be derived from applying the return on equity to the percentage of
13、earnings plowed back into operations.g = return on equity X plowback ratio,Valuing Common Stocks,ExampleOur company forecasts to pay a $5.00 dividend next year, which represents 100% of its earnings. This will provide investors with a 12% expected return. Instead, we decide to plow back 40% of the e
14、arnings at the firms current return on equity of 20%. What is the value of the stock before and after the plowback decision?,Valuing Common Stocks,ExampleOur company forecasts to pay a $5.00 dividend next year, which represents 100% of its earnings. This will provide investors with a 12% expected re
15、turn. Instead, we decide to blow back 40% of the earnings at the firms current return on equity of 20%. What is the value of the stock before and after the plowback decision?,No Growth,With Growth,Valuing Common Stocks,Example - continuedIf the company did not plowback some earnings, the stock price
16、 would remain at $41.67. With the plowback, the price rose to $75.00. The difference between these two numbers (75.00-41.67=33.33) is called the Present Value of Growth Opportunities (PVGO).,下载更多培训资料，尽在http:/,Valuing Common Stocks,Present Value of Growth Opportunities (PVGO) - Net present value of a firms future investments.Sustainable Growth Rate - Steady rate at which a firm can grow: plowback ratio X return on equity.,下载更多培训资料，尽在http:/,Web Resources,www.ganesha.org/invest/index.html I ,Click to access web sites Internet connection required,Web Links,下载更多培训资料，尽在http:/,
