Valuation课件.ppt

A Simple Example Assume that you have been asked to estimate the PE ratio for a firm which has the following characteristics: Variable High Growth Phase Stable Growth Phase Expected Growth Rate 25% 8% Payout Ratio 20% 50% Beta 1.00 1.00 Number of years 5 years Forever after year 5 Riskfree rate = T.Bond Rate = 6% Required rate of return = 6% + 1(5.5%)= 11.5% a. PE and Growth: Firm grows at x% for 5 years, 8% thereafter b. PE and Risk: A Follow up Example Comparisons of PE across time: PE Ratio for the SP 500 Is low (high) PE cheap (expensive)? A market strategist argues that stocks are over priced because the PE ratio today is too high relative to the average PE ratio across time. Do you agree? Yes No If you do not agree, what factors might explain the higher PE ratio today? E/P Ratios , T.Bond Rates and Term Structure Regression Results There is a strong positive relationship between E/P ratios and T.Bond rates, as evidenced by the correlation of 0.70 between the two variables., In addition, there is evidence that the term structure also affects the PE ratio. In the following regression, using 1960-2005 data, we regress E/P ratios against the level of T.Bond rates and a term structure variable (T.Bond - T.Bill rate) E/P = 2.10% + 0.744 T.Bond Rate - 0.327 (T.Bond Rate-T.Bill Rate) (2.44) (6.64) (-1.34) R squared = 51.35% The Determinants of Multiples… The Value of Control in a publicly traded firm.. If the value of a firm run optimally is significantly higher than the value of the firm with the status quo (or incumbent management), you can write the value that you should be willing to pay as: Value of control = Value of firm optimally run - Value of firm with status quo Value of control at Titan Cements = 40.33 Euros per share - 32.84 Euros per share = 7.49 Euros per share Implications: In an acquisition, this is the most that you would be willing to pay as a premium (assuming no other synergy) As a stockholder, you will be willing to pay a va