《公司理财(双语)5TheValueofCommonStocks》由会员分享，可在线阅读，更多相关《公司理财(双语)5TheValueofCommonStocks（27页珍藏版）》请在金锄头文库上搜索。
1、Chapter 5PrinciplesPrinciples ofof CorporateCorporate FinanceFinanceNinth EditionThe Value of Common Stocks5- 2Topics CoveredHow Common Stocks are TradedHow Common Stocks are Valued5- 3Stocks & Stock MarketNew York Stock Exchange (NYSE) Auction Markets Broker: a broker matches buyers and sellers. Th
2、ey perform the search function for a fee (commission). They do not hold an inventory of securities.5- 4NASDAQDealer 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
3、 difference between the bid and ask pricesOver the counter5- 5Stock Market ReportingGap has been as high as $21.89 in the last year.Gap has been as low as $9.41 in the last year.Gap pays a dividend of 34 cents/share.Given the current price, the dividend yield is 3.1%.Given the current price, the PE
4、ratio is 8 times earnings.8,829,800 shares traded hands in the last days trading.Gap ended trading at $11.06, which is up 45 cents from yesterday.5- 6Stocks & Stock MarketCommon Stock - Ownership shares in a publicly held corporation. Primary market:sales of new shares to raise new capital Secondary
5、 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.5- 7 The PV of Common StocksThe value of any asset is the present value of its expected futu
6、re cash flows. Stock ownership produces cash flows from: Dividends Capital Gains Valuation of Different Types of Stocks Zero Growth Constant Growth Differential Growth5- 8Valuing Common StocksExpected Return - The percentage yield that an investor forecasts from a specific investment over a set peri
7、od of time. Sometimes called the market capitalization rate. 5- 9Valuing Common StocksExample: 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?5- 10Valuing Common Sto
8、cksAnother 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?5- 11Valuing Common StocksDividend Discount Model - Comput
9、ation of todays stock price which states that share value equals the present value of all expected future dividends.H - Time horizon for your investment.5- 12Valuing Common StocksExample Current forecasts are for XYZ Company to pay dividends of $3, $3.24, and $3.50 over the next three years, respect
10、ively. 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?5- 13Valuing Common StocksExample Current forecasts are for XYZ Company to pay dividends of $3, $3.24, and $3.50 over the next three years, respe
11、ctively. 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?5- 14Valuing Common Stocks5- 15Case 1: Zero GrowthAssume that dividends will remain at the same level forever, we will then value the stock as
12、a PERPETUITY.Since future cash flows are constant, the value of a zero growth stock is the present value of a perpetuity:5- 16Case 2: Constant GrowthConstant Growth DDM - A version of the dividend growth model in which dividends grow at a constant rate (Gordon Growth Model).5- 17Case 2: Constant Gro
13、wthSince 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., .5- 18Valuing Common StocksExample If a stock is selling for $100 in the stock market, w
14、hat 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.5- 19Constant Growth ExampleSuppose Big D, Inc., just
15、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) = $3.925- 20Case 3: Differential GrowthAssume that dividends will grow at diff
16、erent 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 ap
