财务管理培训课件(PPT 36页)bveu.pptx

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1、Chapter 8Chapter 8Stock ValuationStock ValuationMcGraw-Hill/IrwinCopyright 2013 by The McGraw-Hill Companies,Inc.All rights reserved.Key Concepts and SkillsUnderstand how stock prices depend on future dividends and dividend growthBe able to compute stock prices using the dividend growth modelUnderst

2、and how corporate directors are electedUnderstand how stock markets workUnderstand how stock prices are quoted8-2Chapter OutlineCommon Stock ValuationSome Features of Common and Preferred StocksThe Stock Markets8-3Cash Flows for StockholdersIf you buy a share of stock,you can receive cash in two way

3、sThe company pays dividendsYou sell your shares,either to another investor in the market or back to the companyAs with bonds,the price of the stock is the present value of these expected cash flows 8-4One-Period ExampleSuppose you are thinking of purchasing the stock of Moore Oil,Inc.You expect it t

4、o pay a$2 dividend in one year,and you believe that you can sell the stock for$14 at that time.If you require a return of 20%on investments of this risk,what is the maximum you would be willing to pay?Compute the PV of the expected cash flowsPrice=(14+2)/(1.2)=$13.33Or FV=16;I/Y=20;N=1;CPT PV=-13.33

5、8-5Two-Period ExampleNow,what if you decide to hold the stock for two years?In addition to the dividend in one year,you expect a dividend of$2.10 in two years and a stock price of$14.70 at the end of year 2.Now how much would you be willing to pay?PV=2/(1.2)+(2.10+14.70)/(1.2)2=13.338-6Three-Period

6、ExampleFinally,what if you decide to hold the stock for three years?In addition to the dividends at the end of years 1 and 2,you expect to receive a dividend of$2.205 at the end of year 3 and the stock price is expected to be$15.435.Now how much would you be willing to pay?PV=2/1.2+2.10/(1.2)2+(2.20

7、5+15.435)/(1.2)3=13.338-7Developing The ModelYou could continue to push back the year in which you will sell the stockYou would find that the price of the stock is really just the present value of all expected future dividendsSo,how can we estimate all future dividend payments?8-8Estimating Dividend

8、s:Special CasesConstant dividendThe firm will pay a constant dividend foreverThis is like preferred stockThe price is computed using the perpetuity formulaConstant dividend growthThe firm will increase the dividend by a constant percent every periodThe price is computed using the growing perpetuity

9、modelSupernormal growthDividend growth is not consistent initially,but settles down to constant growth eventuallyThe price is computed using a multistage model8-9Zero GrowthIf dividends are expected at regular intervals forever,then this is a perpetuity and the present value of expected future divid

10、ends can be found using the perpetuity formulaP0=D/RSuppose stock is expected to pay a$0.50 dividend every quarter and the required return is 10%with quarterly compounding.What is the price?P0=.50/(.1/4)=$208-10Dividend Growth ModelDividends are expected to grow at a constant percent per period.P0=D

11、1/(1+R)+D2/(1+R)2+D3/(1+R)3+P0=D0(1+g)/(1+R)+D0(1+g)2/(1+R)2+D0(1+g)3/(1+R)3+With a little algebra and some series work,this reduces to:8-11DGM Example 1Suppose Big D,Inc.,just paid a dividend of$0.50 per share.It is expected to increase its dividend by 2%per year.If the market requires a return of

12、15%on assets of this risk,how much should the stock be selling for?P0=.50(1+.02)/(.15-.02)=$3.928-12DGM Example 2Suppose TB Pirates,Inc.,is expected to pay a$2 dividend in one year.If the dividend is expected to grow at 5%per year and the required return is 20%,what is the price?P0=2/(.2-.05)=$13.33

13、Why isnt the$2 in the numerator multiplied by(1.05)in this example?8-13Stock Price Sensitivity to Dividend Growth,gD1=$2;R=20%8-14Stock Price Sensitivity to Required Return,RD1=$2;g=5%8-15Example 8.3 Gordon Growth Company-IGordon Growth Company is expected to pay a dividend of$4 next period,and divi

14、dends are expected to grow at 6%per year.The required return is 16%.What is the current price?P0=4/(.16-.06)=$40Remember that we already have the dividend expected next year,so we dont multiply the dividend by 1+g8-16Example 8.3 Gordon Growth Company-IIWhat is the price expected to be in year 4?P4=D

15、4(1+g)/(R g)=D5/(R g)P4=4(1+.06)4/(.16-.06)=50.50What is the implied return given the change in price during the four year period?50.50=40(1+return)4;return=6%PV=-40;FV=50.50;N=4;CPT I/Y=6%The price is assumed to grow at the same rate as the dividends8-17Nonconstant Growth Example-ISuppose a firm is

16、 expected to increase dividends by 20%in one year and by 15%in two years.After that,dividends will increase at a rate of 5%per year indefinitely.If the last dividend was$1 and the required return is 20%,what is the price of the stock?Remember that we have to find the PV of all expected future divide

17、nds.8-18Nonconstant Growth Example-IICompute the dividends until growth levels offD1=1(1.2)=$1.20D2=1.20(1.15)=$1.38D3=1.38(1.05)=$1.449Find the expected future priceP2=D3/(R g)=1.449/(.2-.05)=9.66Find the present value of the expected future cash flowsP0=1.20/(1.2)+(1.38+9.66)/(1.2)2=8.678-19Quick

18、Quiz Part IWhat is the value of a stock that is expected to pay a constant dividend of$2 per year if the required return is 15%?What if the company starts increasing dividends by 3%per year,beginning with the next dividend?The required return stays at 15%.8-20Using the DGM to Find RStart with the DG

19、M:8-21Example:Finding the Required Return Suppose a firms stock is selling for$10.50.It just paid a$1 dividend,and dividends are expected to grow at 5%per year.What is the required return?R=1(1.05)/10.50+.05=15%What is the dividend yield?1(1.05)/10.50=10%What is the capital gains yield?g=5%8-22Stock

20、 Valuation Using MultiplesAnother common valuation approach is to multiply a benchmark PE ratio by earnings per share(EPS)to come up with a stock pricePt=Benchmark PE ratio*EPStThe benchmark PE ratio is often an industry average or based on a companys own historical valuesThe price-sales ratio can a

21、lso be used8-23Example:Stock Valuation Using Multiples Suppose a company had earnings per share of$3 over the past year.The industry average PE ratio is 12.Use this information to value this companys stock price.Pt =12 x$3=$36 per share8-24Table 8.1-Stock Valuation Summary8-25Features of Common Stoc

22、kVoting RightsProxy votingClasses of stockOther RightsShare proportionally in declared dividendsShare proportionally in remaining assets during liquidationPreemptive right first shot at new stock issue to maintain proportional ownership if desired8-26Dividend CharacteristicsDividends are not a liabi

23、lity of the firm until a dividend has been declared by the BoardConsequently,a firm cannot go bankrupt for not declaring dividendsDividends and TaxesDividend payments are not considered a business expense;therefore,they are not tax deductibleThe taxation of dividends received by individuals depends

24、on the holding periodDividends received by corporations have a minimum 70%exclusion from taxable income8-27Features of Preferred StockDividendsStated dividend that must be paid before dividends can be paid to common stockholdersDividends are not a liability of the firm,and preferred dividends can be

25、 deferred indefinitelyMost preferred dividends are cumulative any missed preferred dividends have to be paid before common dividends can be paidPreferred stock generally does not carry voting rights8-28Stock MarketDealers vs.BrokersNew York Stock Exchange(NYSE)Largest stock market in the worldLicens

26、e holders(1,366)Commission brokersSpecialistsFloor brokersFloor tradersOperationsFloor activity8-29NASDAQNot a physical exchange computer-based quotation systemMultiple market makersElectronic Communications NetworksThree levels of informationLevel 1 median quotes,registered representativesLevel 2 v

27、iew quotes,brokers&dealersLevel 3 view and update quotes,dealers onlyLarge portion of technology stocks8-30Work the Web ExampleElectronic Communications Networks provide trading in NASDAQ securitiesClick on the web surfer and visit Instinet8-31What information is provided in the stock quote?Click on

28、 the web surfer to go to Bloomberg for current stock quotes.Reading Stock Quotes8-32Quick Quiz Part IIYou observe a stock price of$18.75.You expect a dividend growth rate of 5%,and the most recent dividend was$1.50.What is the required return?What are some of the major characteristics of common stoc

29、k?What are some of the major characteristics of preferred stock?8-33Ethics IssuesThe status of pension funding(i.e.,over-vs.under-funded)depends heavily on the choice of a discount rate.When actuaries are choosing the appropriate rate,should they give greater priority to future pension recipients,ma

30、nagement,or shareholders?How has the increasing availability and use of the internet impacted the ability of stock traders to act unethically?8-34Comprehensive ProblemXYZ stock currently sells for$50 per share.The next expected annual dividend is$2,and the growth rate is 6%.What is the expected rate of return on this stock?If the required rate of return on this stock were 12%,what would the stock price be,and what would the dividend yield be?8-35End of Chapter8-36