Chapter 4 Discounted cash flow valuation课件.pptVIP

Growing annuity example Emily has just been offered a job at $80,000 a year. She anticipates her salary increasing by 9% a year until her retirement in 40 years. Given an interest rate of 20%, what is the present value of her lifetime salary? PV = C ? { [ 1 – ((1 + g) / (1 + i))N ] / (i – g) } = $80,000 ? { [ 1 – ((1 + 9%) / (1 + 20%))40 ] / (20% – 9%) } = $711,730.71. 极灌跪荆万亩铸销撞愚广孵绽琐豫秧占络琶橙犬咳专瓤订啥芝屹绽亡飞瘁Chapter 4 Discounted cash flow valuation课件Chapter 4 Discounted cash flow valuation课件 Perpetuity Perpetuity: a constant stream of cash flows without end. PV = C / i. 扳秽磨累刺豹艰择土雾磊氧硫谐杀贡贬炕哮鞋刷囱拌话吏佛思蝗遗馆复左Chapter 4 Discounted cash flow valuation课件Chapter 4 Discounted cash flow valuation课件 Perpetuity example Preferred stock promises the buyer a fixed cash dividend every period (usually every quarter) forever. Suppose that VTinsurance Inc. wants to sell preferred stock. The quarterly dividend is $1 per share. The required rate of return for this issue is 2.5% per quarter. What is the fair value of this issue? PV = C / i = $1 / 2.5% = $40 (per share). 跪曹据察跑灯美舆沁湘芭面傈燎税油俺划宿祥衙讥扼昭米舱栏燥坷钙篙疵Chapter 4 Discounted cash flow valuation课件Chapter 4 Discounted cash flow valuation课件 Growing perpetuity Growing perpetuity: an infinite cash flow stream that grows at a constant rate, g. PV = C1 / (i – g), C1 is the cash flow at time 1. 娃炕辩著英攒呈朴宾垣蠢茶凰蚊疗票葫佳幂骆拳饲交矽吾郊廷浩芹百鬃梦Chapter 4 Discounted cash flow valuation课件Chapter 4 Discounted cash flow valuation课件 Growing perpetuity example Toyota is expected to pay a dividend (annual dividend) of $3 per share in a year. Investors also anticipate that the annual dividend will rise by 6% per year forever. The applicable discount rate is 11%. What is the present value of future dividends? PV = C1 / (i – g) = $3 / (11% – 6%) = $60 per share. 伶慨郸逼帘命瘦窿祟晴焙路述泽审巍沙仲再秀竖以幕旺贰影扮敛划碌弹沃Chapter 4 Discounted cash flow valuation课件Chapter 4 Discounted cash flow valuation课件 Comparing rates, I Rates are quoted in many different ways. Tradition. Legislation. Effective annu