公司理财(双语)5TheValueofCommonStock.ppt

,Chapter 5,Principles of Corporate Finance Ninth Edition,The Value of Common Stocks,Topics Covered,How Common Stocks are Traded How Common Stocks are Valued,Stocks & Stock Market,New York Stock Exchange (NYSE) Auction Markets Broker: a broker matches buyers and sellers. They perform the search function for a fee (commission). They do not hold an inventory of securities.,NASDAQ,Dealer Markets Dealer: maintains an inventory and stands ready to trade at quoted bid (price at which they will buy) and ask (price at which they will sell) prices. Make their profit from the difference between the bid and ask prices Over the counter,Stock Market Reporting,Stocks & Stock Market,Common Stock - Ownership shares in a publicly held corporation. Primary market:sales of new shares to raise new capital 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 divided by earnings per share.,The PV of Common Stocks,The value of any asset is the present value of its expected future cash flows. Stock ownership produces cash flows from: Dividends Capital Gains Valuation of Different Types of Stocks Zero Growth Constant Growth Differential Growth,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 market capitalization rate.,Valuing Common Stocks,Example: If GE is selling for $100 per share today and is expected to sell for $110 one year from now, what is the expected return if the dividend one year from now is forecasted to be $5.00?,Valuing Common Stocks,Another Example: You purchase an ownership share in the Nestl for $50,000. In one year you expect the Nestl pay you a dividend of $3,000. You think you will be able to sell your share for $58,000 at that time. What is your expected return?,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.,Valuing Common Stocks,Example Current forecasts 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,Example Current forecasts 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,Case 1: Zero Growth,Assume that dividends will remain at the same level forever, we will then value the stock as a PERPETUITY.,Since future cash flows are constant, the value of a zero growth stock is the present value of a perpetuity:,Case 2: Constant Growth,Constant Growth DDM - A version of the dividend growth model in which dividends grow at a constant rate (Gordon Growth Model).,Case 2: Constant Growth,Since future cash flows grow at a constant rate forever, the value of a constant growth stock is the present value of a growing perpetuity:,Assume that dividends will grow at a constant rate, g, forever, i.e.,.,.,.,Valuing Common Stocks,Example If a stock is selling for $100 in the stock market, what might the market be assuming about the growth in dividends? it just paid a dividend of $.3. If the market requires a return of 12% on assets of this risk level,Answer The market is assuming the dividend will grow at 9% per year, indefinitely.,Constant Growth Example,Suppose Big D, Inc., just paid a dividend of $.50. It is expected to increase its dividend by 2% per year. If the market requires a return of 15% on assets of this risk level, how much should the stock be selling for? P0 = .50(1+.02) / (.15 - .02) = $3.92,Case 3: Differential Growth,Assume that dividends will grow at different rates in the foreseeable future and then will grow at a constant rate thereafter. To value a Differential Growth Stock, we need to: Estimate future dividends in the foreseeable future. Estimate the future stock price when the stock becomes a Constant Growth Stock (case 2). Compute the total present value of the estimated future dividends and future stock price at the appropriate discount rate.,Valuing Common Stocks,Valuing Common Stocks,Consider xyz Company, which is enjoying rapid growth from the introduction of its new backrub ointment. The dividend for a share of xyzs stock a year from today will be $1.15. During the next four years, the dividend will grow at 15 percent per year (g1 = 15%). After that, growth (g2) will be equal to 10 percent per year. Calculate the present value of a share of stock if the required return (R) is 15 percent.,Valuing Common Stocks,We need to apply a two-step process to discount these dividends. We first calculate the present value of the dividends growing at 15 percent per annum. That is, we first calculate the present value of the dividends at the end of each of the first five years. Second, we calculate the present value of the divi