ACCA_F9 course notes new_02资料.ppt

* * * Valuing Common Stocks Example: If Fledgling Electronics 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 Indianapolis Colts for $50,000, who just won the Super Bowl. In one year you expect the Colts to repeat as Super Bowl champions and 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 Capitalization Rate can be estimated using the perpetuity formula, given minor algebraic manipulation. Valuing Common Stocks The formula can be broken into two parts. Dividend Yield + Capital Appreciation Valuing Common Stocks Dividend Discount Model - Computation of today’s 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 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 Valuing Common Stocks Return Measurements Valuing Common Stocks If we forecast no growth, and 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 const