4Bond Valuation.docx
- 文档编号:10428152
- 上传时间:2023-02-11
- 格式:DOCX
- 页数:10
- 大小:49.40KB
4Bond Valuation.docx
《4Bond Valuation.docx》由会员分享,可在线阅读,更多相关《4Bond Valuation.docx(10页珍藏版)》请在冰豆网上搜索。
4BondValuation
Chapter7StockValuation
Calculation:
PreferredStockPrice(byzerogrowthmodel),CommonStockPrice(byconstantgrowthmodel,variablegrowthmodel,orP/Emultipleapproaches),ExpectedReturn.
Concepts:
PreemptiveRight,PreferredStock,expectedreturn.
1.CommonStock
Pros:
(asashareholder)
•Votingrights,
•companycontrolandPreemptiveRights
•Sharethefirm’sgrowth
Cons:
•Lowerpriorityofresidualclaimonthefirm’sincomeandassets.
•Moreuncertainty:
dividends,stockprices
•Apreemptiverightallowscommonstockholderstomaintainvotingcontrolandprotectagainstthedilutionoftheirownershipinacorporationwhennewsharesareissued.
•Inarightsoffering,thefirmgrantsrightstoitsexistingshareholders,whichpermitsthemtopurchaseadditionalsharesatapricebelowthecurrentprice.
2.PreferredStock
Preferredstockpaysafixeddividendandhasapriorclaimonthefirm’searningsandassetstocommonstock.Thismeansitmustfirstpaythepreferredstockdividendsbeforepayingcommonstockdividend.Uponbankruptcy,preferredstockholdershaveaprioritytogetpaidbytheresidualassets.
Thedividendisexpressedaseitheradollaramountorasapercentageofitsparvalue.Theparvalueofacorporatebondisstandardizedto$1000,buttheparofapreferredstockvariesbycompany.
Ifthefirmexperiencesoperationalorfinancialstress,andcannotpaypreferredstockdividend,thedividendwillbecumulatedaslongasthreeyearsuntilthefirmrecoversfromthedifficultyandpaythemall.ItisalsocalledasCumulativepreferredstocks.
OtherProvisions:
∙Callfeaturesgivetheissuingfirmtheoptiontoretirethemshouldtheneedoradvantagearise.
∙Mandatorysinkingfundsallowthefirmtoretiretheissueovertime.
∙Conversionprovidetherighttoconvertoneshareofpreferredstocktoapresetamountofcommonstockswithinapresetperiodoftime
TypeofCapital
Features
Debt
Equity
PreferredStock
CommonStock
Forissuers:
Taxtreatment
Interestdeductible
Payments
Coupons(fixed)+Principal
Dividends(fixed)
Dividends(flexible)
CostofCapital
Lowest
Median
High
Potentialproblems
Legalissuewhencouponorprincipalpaymentsoverdue
Mustpaydividendsinrears
Dilutionofcompanycontrol
Forinvestors:
Claimsonincomeandassets
FirstPriority
Secondpriority
Subordinate
Risks
Defaultrisk
Someoperationalrisk
Operationalrisk
Rateofreturn
Low
Low,butcouldbelowerthandebt
high
Taxtreatment
80%deductibleforinstitutionalinvestors
3.TypesofExternalEquityFinancing
Whenafirmwishestosellitsstockintheprimarymarket,ithasthreealternatives.
∙ApublicofferingorIPO,inwhichitoffersitssharesforsaletothegeneralpublicthroughinvestmentbankers.
∙Arightsoffering,inwhichnewsharesaresoldtoexistingshareholders.
∙Aprivateplacement,inwhichthefirmsellsnewsecuritiesdirectlytoaninvestororagroupofinvestors.
4.StockPriceQuotations
GOLDMANSACHSGROUPINC GS(NYSE)
Last
Change / PctChange
211.61
1.53/0.73%
Open
210.06
High
211.80
Low
209.71
PrevClose
210.08
Volume
2,807,238
AvgVol
11,854,106
LastTrade
Mar23200712:
24:
32EDT
P/ERatio
8.896
EPS
22.68
Dividend
1.4
DivYield
0.66
SharesOutstanding
412.95M
MarketCap
87.38B
Day'sRange
209.71to211.80
52WeekRange
136.79to222.75
Last–mostrecentmarketpriceofthestock
High–Today’shigheststockpriceuntilthismoment
Low–Todaylowestpriceuntilthismoment
PrevClose–thepriceofthelasttradebeforetheclosingbellinthelasttradingday
Volume–tradingvolumeuntilthismoment
LastTrade–thetimewhenthisquoteisrecorded
DivYield–orDiv%,isthedividendyield.Thenumberisinpercentage
Divyield=dividendspaidoverthelast12months/currentstockprice
=$1.4/$211.61*100%
=0.66%
5.StockValuation
Incompetitivemarkets,theinteractionofmanybuyersandsellersresult’sinanequilibriumprice—themarketvalue—foreachsecurity.Inmarketequilibrium,theintrinsic(,ortheactual)valueofastockequalstothetotalpresentvalues(PV)ofeachamountofitsfuture’scashinflow:
dividends.
StockValue=PVofallthedividendsreceivedafterstockpurchase
=PVofDivinyear1+PVofDivinyr2+PVofDivinyr3+…
Notethatcommonstockhasnoexpirationdate,ifthecompanystillexistsandrunsitsbusiness;itscommonstockshouldalwaysbetradableandpaydividends.Therefore,thenumberofdividendpaymentofacommonstockisimmeasurable,orinfinite.ThecalculationofstockvalueistosummarizethePVsofendlessdividendpayments.
MarketPrice>StockValue
Stockisoverbought;itistimetosellorshortit.
MarketPrice Stockisoversold;itistimetobuyin. Differentdividendpaymentpatternsneedtoadoptdifferentmodelinstockvaluation.Therearethreemodelsbasedondividendinformationthatyoucanchoosefrom: zerogrowth,constantgrowth,orvariablegrowthmodel. 1)TheZeroGrowthModel Condition: Companiesalwayspaysthesameamountofdividendeachyear. Usage: Calculatethevalueofpreferredstock. P0=D/ks Example: Whatisthevalueofapreferredstockwithan$80parvalueand10%annualdividend,iftherequiredreturnis12%? D=parvalue*couponrate =$80*10% =$8 P0=D/ks =$8/12% =$66.67 ExerciseQuestions: 1.Whatisthevalueofapreferredstock,ifithasa$120parvalue,6%couponrate,and8%requiredreturn? 2.ThedividendofDenhamCompanyisexpectedtoremainconstantat$3pershareindefinitely.WhatisthevalueofDenham’sstockiftherequiredreturndemandedbyinvestorsis15%? 2)ConstantGrowthModel Condition: Dividendswillgrowataconstantrateeachyearforever. Usage: Valuationofincomeorvaluestocks(,whichusuallyhavelowmarketpriceandpayhighpercentageofdividends,e.g.utilitycompanies.) P0=D1/(ks–g) where,D1=D0*(1+g) Example: AmericanStatesWaterCo.currentpaysanannualdividendof$1,anddividendsgrowataconstantrateof5%,iftherequiredrateofreturnonthestockis7%,whatisthestock’scurrentvalue? Given: D0=1,g=5%,ks=7% Calculation: D1=D0*(1+g) =1*(1+5%) =1.05, P0=D1/(ks–g) =$1.05/(7%–5%) =$52.5 Notethat,dividendthatarealreadyannouncedorpaidshouldberecognizedasD0,i.e.currentdividend.D1isusuallyneededtocalculate. Exercisequestion: Supposethecompanycurrentfacedabiglawsuitwhichwilllargelyreduceitsearningsinthefuture.Duetothisincreasingrisk,investorswillstillbuythestockONLYIFitsrequirereturnincreasesto18%.Whatwillhappentoitsstockprice? Calculateitsvalue. 3)Variable-GrowthModel Condition: DividendsgrowatvariousratesinthefirstNyears,andthenstabilizetoaconstantratethereafter. Usage: valuationongrowthstocks(,whichareexperiencingfastorirregulargrowthinthenearfuture,butwillturntoamorestableandconstantgrowthinalongrun.E.g.high-techcompanieslikeYahoo,financialcompanieslikeGoldmanSachs,orpharmaceuticalcompanieslikeMerck,etc.) Thesimplestcase: stockdividendsfirstgrowattherateofg1,andg2afteryearN. Step1.Calculatethedividendsduringtheinitialgrowthperiod,yr1toyrN. D1=D0*(1+g1) D2=D1*(1+g1) …… DN=DN-1*(1+g1) Step2.Findthevalueofthestockattheendoftheinitialgrowthperiod, PN=DN*(1+g2)/(ks-g2) Step3.CalculatethePVsofD1toDN,thePVofPN,andaddallthePVstogethertogetP0. ForeachPV,onyourcalculator,usethekeysofI/Y,FV,NandPV. ThensumupallthePVs. Example: GoldmanSachspaid$2pershareoverthelast12months.Dividendsareexpectedtoincreaseat14%,inthenextthreeyears,andat10%thereafter.Thefirm’srequiredreturnis11%.Whatshouldthestock’scurrentprice? Step1Dividendcalculation Year g LastDiv * (1+g) = NewDiv 1 14% 2 * ( 1+14% ) = 2.28 2 14% 2.28 * ( 1+14% ) = 2.60 3 14% 2.60 * ( 1+14% ) = 2.96 4 10% 2.96 5 10% 6 10% … … Step2stockvalueatthelastyearofthefastgrowingperiod,i.e.year3. P3=D3*(1+g2)/(ks-g2) =2.96*(1+10%)/(11%-10%) =2.96*1.1/0.01 =325.94 Step3PVcalculationusingcalculator I/Y FV N CPT PV PVofDiv 11 2.28 1 2.0541 11 2.5992 2 2.1096 11 2.96309 3 2.1666 PVofP3 11 325.94 3 238.32 total 244.65 P0 244.65 So,thevalueofGoldmanSachsis$244.65. ExerciseQuestion: WhatwilltheGS’svaluebe,ifitsrequiredreturnis12%anditsdividendsareexpectedtogrowat20%inthefirsttwoyearsandthenturnto10%thereafter? Year g LastDiv * (1+g) = NewDiv 1 * ( ) = 2 * ( ) = 3 * ( ) = 4 * ( ) = 5 * ( ) = PN=DN*(1+g2)/(ks-g2) I/R FV N CPT PV PVofDiv PVofPN P0 total 6.Valuation: Price/Earnings(P/E)MultiplesApproach Somestockspaynodividends—usingP/Eratiosisanalternativewaytofindtheirvalues. P0=EPSt+1*(P/E) Forexample,theearningestimateof.innextyearis
- 配套讲稿:
如PPT文件的首页显示word图标,表示该PPT已包含配套word讲稿。双击word图标可打开word文档。
- 特殊限制:
部分文档作品中含有的国旗、国徽等图片,仅作为作品整体效果示例展示,禁止商用。设计者仅对作品中独创性部分享有著作权。
- 关 键 词:
- 4Bond Valuation Bond