江南大学《公司金融学》课件-第4章How to Value Bonds and Stocks.pptxVIP

5-0CHAPTER4How to ValueBonds and Stocks江南大学《公司金融学》 5-1Chapter Outline4.1 Definition and Example of a Bond4.2 How to Value Bonds4.3 Bond Concepts4.4 The Present Value of Common Stocks4.5 Estimates of Parameters in the Dividend-Discount Model4.6 Growth Opportunities4.7 The Dividend Growth Model and the NPVGO Model (Advanced)4.8 Price Earnings Ratio4.9 Stock Market Reporting4.10 Summary and Conclusions 5-2Valuation of Bonds and StockFirst Principles:Value of financial securities = PV of expected future cash flows To value bonds and stocks we need to: Estimate future cash flows: Size (how much) and Timing (when) Discount future cash flows at an appropriate rate:The rate should be appropriate to the risk presented by the security. 5-34.1 Definition and Exampleof a BondA bond is a legally binding agreement between a borrower and a lender:Specifies the principal amount of the loan.Specifies the size and timing of the cash flows:In dollar terms (fixed-rate borrowing)As a formula (adjustable-rate borrowing) 5-44.1 Definition and Exampleof a BondConsider a U.S. government bond listed as 6 3/8 of December 2009.The Par Value of the bond is $1,000.Coupon payments are made semi-annually (June 30 and December 31 for this particular bond).Since the coupon rate is 6 3/8 the payment is $31.874.On January 1, 2005 the size and timing of cash flows are: 5-54.2 How to Value BondsIdentify the size and timing of cash flows.Discount at the correct discount rate.If you know the price of a bond and the size and timing of cash flows, the yield to maturity is the discount rate. 5-6Pure Discount BondsInformation needed for valuing pure discount bonds:Time to maturity (T) = Maturity date - today’s dateFace value (F)Discount rate (r)Present value of a pure discount bond at time 0: 5-7Pure Discount Bonds: ExampleFind the value of a 30-year zero-coupon bond with a $1,000 par value and a YTM of 6%. 5-8Pure Discount Bonds: ExampleFind the value of a 30-year zero-coupon bond with a $1,0