（财务管理英文课件）The-Valuation-of-Long-Term-Securities.ppt

1、4-14-2uDistinctions Among Valuation ConceptsuBond ValuationuPreferred Stock ValuationuCommon Stock ValuationuRates of Return (or Yields)4-3represents the amount a firm could be sold for as a continuing operating business.represents the amount of money that could be realized if an asset or group of a

2、ssets is sold separately from its operating organization.4-4(2) a firm: total assets minus liabilities and preferred stock as listed on the balance sheet.represents either (1) an asset: the accounting value of an asset - the assets cost minus its accumulated depreciation; 4-5represents the price a s

3、ecurity ought to have?based on all factors bearing on valuation.represents the market price at which an asset trades.4-6uImportant TermsuTypes of BondsuValuation of BondsuHandling Semiannual Compounding4-7uThe () or face value of a bond is the stated value. In the case of a U.S. bond, the face value

4、 is usually $1,000. uA is a long-term debt instrument issued by a corporation or government.4-8uThe (capitalization rate) is dependent on the risk of the bond and is composed of the risk-free rate plus a premium for risk.uThe bonds is the stated rate of interest; the annual interest payment divided

5、by the bonds face value.4-9A is a bond that never matures. It has an infinite life.(1 + kd)1(1 + kd)2(1 + kd)V =+ . +III= t=1(1 + kd)tIor I (PVIFA kd, )= / Reduced Form4-10Bond P has a $1,000 face value and provides an 8% coupon. The appropriate discount rate is 10%. What is the value of the ? = $1,

6、000 ( 8%) = . = . = / Reduced Form = / =.4-11A is a coupon paying bond with a finite life.(1 + kd)1(1 + kd)2(1 + kd)V =+ . +II + MVI= t=1(1 + kd)tI= I (PVIFA kd, ) + MV (PVIF kd, ) (1 + kd)+MV4-12Bond C has a $1,000 face value and provides an 8% annual coupon for 30 years. The appropriate discount r

7、ate is 10%. What is the value of the coupon bond? = $80 (PVIFA10%, 30) + $1,000 (PVIF10%, 30) = $80 (9.427) + $1,000 (.057) = $754.16 + $57.00=.4-13A is a bond that pays no interest but sells at a deep discount from its face value; it provides compensation to investors in the form of price appreciat

8、ion.(1 + kd)V =MV= MV (PVIFkd, ) 4-14= $1,000 (PVIF10%, 30)= $1,000 (.057)=Bond Z has a $1,000 face value and a 30 year life. The appropriate discount rate is 10%. What is the value of the zero-coupon bond?4-15(1) Divide by (2) Multiply by (3) Divide by Most bonds in the U.S. pay interest twice a ye

9、ar (1/2 of the annual coupon).Adjustments needed:4-16(1 + kd/) *(1 + kd/)1A adjusted for semiannual compounding.V =+ . +I / I / + MV= *t=1(1 + kd /)tI / = I/ (PVIFAkd /,*) + MV (PVIFkd /,*) (1 + kd /) *+MVI / (1 + kd/)24-17= $40 (PVIFA5%, 30) + $1,000 (PVIF5%, 30) = $40 (15.373) + $1,000 (.231) = $6

10、14.92 + $231.00=Bond C has a $1,000 face value and provides an 8% semiannual coupon for 15 years. The appropriate discount rate is 10% (annual rate). What is the value of the coupon bond?4-18 is a type of stock that promises a (usually) fixed dividend, but at the discretion of the board of directors

11、.Preferred Stock has preference over common stock in the payment of dividends and claims on assets.4-19This reduces to a !(1 + kP)1(1 + kP)2(1 + kP) =+ . +DivPDivPDivP= t=1(1 + kP)tDivPor DivP(PVIFA kP, ) = DivP / kP4-20 = $100 ( 8% ) = . = . = / = / =Stock PS has an 8%, $100 par value issue outstan

12、ding. The appropriate discount rate is 10%. What is the value of the ?4-21uProrata share of future earnings after all other obligations of the firm (if any remain).uDividends be paid out of the prorata share of earnings.represents a residual ownership position in the corporation.4-22(1) Future divid

13、ends(2) Future sale of the common stock sharesWhat cash flows will a shareholder receive when owning shares of ?4-23Basic dividend valuation model accounts for the PV of all future dividends.(1 + ke)1(1 + ke)2(1 + ke)V =+ . +Div1DivDiv2= t=1(1 + ke)tDivtDivt: Cash Dividend at time tke: Equity invest

14、ors required return4-24The basic dividend valuation model adjusted for the future stock sale.(1 + ke)1(1 + ke)2(1 + ke)V =+ . +Div1Div + PriceDiv2:The year in which the firms shares are expected to be sold.Price :The expected share price in year . 4-25The dividend valuation model requires the foreca

15、st of all future dividends. The following dividend growth rate assumptions simplify the valuation process.4-26The assumes that dividends will grow forever at the rate g.(1 + ke)1(1 + ke)2(1 + ke) V =+ . +D0(1+g)D0(1+g) =(ke - g)D1D1:Dividend paid at time 1.g : The constant growth rate.ke: Investors

16、required return.D0(1+g)24-27Stock CG has an expected growth rate of 8%. Each share of stock just received an annual $3.24 dividend per share. The appropriate discount rate is 15%. What is the value of the ? = ( 1 + .08 ) = = / ( - g ) = / ( - .08 ) =4-28The assumes that dividends will grow forever a

17、t the rate g = 0.(1 + ke)1(1 + ke)2(1 + ke) V =+ . +D1D =keD1D1:Dividend paid at time 1.ke: Investors required return.D24-29Stock ZG has an expected growth rate of 0%. Each share of stock just received an annual $3.24 dividend per share. The appropriate discount rate is 15%. What is the value of the

18、 ? = ( 1 + 0 ) = = / ( - 0 ) = / ( - 0 ) =4-30D0(1+g1)tDn(1+g2)tThe assumes that dividends for each share will grow at two or more different growth rates.(1 + ke)t(1 + ke)tV = t=1n t=n+1 +4-31D0(1+g1)tDn+1Note that the second phase of the assumes that dividends will grow at a constant rate g2. We ca

19、n rewrite the formula as:(1 + ke)t(ke - g2)V = t=1n+1(1 + ke)n4-32Stock GP has an expected growth rate of 16% for the first 3 years and 8% thereafter. Each share of stock just received an annual $3.24 dividend per share. The appropriate discount rate is 15%. What is the value of the common stock und

20、er this scenario?4-33First, determine the annual dividend. D0 = $3.24 = D0(1+g1)1 = $3.24(1.16)1 = = D0(1+g1)2 = $3.24(1.16)2 = = D0(1+g1)3 = $3.24(1.16)3 = = D3(1+g2)1 = $5.06(1.08)1 =4-34Second, determine the PV of cash flows.PV() = (PVIF15%, 1) = (.870) = PV() = (PVIF15%, 2) = (.756) = PV() = (PV

21、IF15%, 3) = (.658) = = / (.15 - .08) = $78 CG ModelPV() = (PVIF15%, 3) = (.658) = 4-35D0(1+.16)tD4Third, calculate the by summing all of cash flow present values.(1 + .15)t(.15-.08)V = t=13+1(1+.15)nV = $3.27 + $3.30 + $3.33 + $51.324-361. Determine the expected .2. Replace the intrinsic value (V) w

22、ith the .3. Solve for the that equates the to the . Steps to calculate the rate of return (or Yield).4-37Determine the Yield-to-Maturity (YTM) for the coupon paying bond with a finite life.P0 = t=1(1 + kd )tI= I (PVIFA kd , ) + MV (PVIF kd , ) (1 + kd )+MVkd = YTM4-38Julie Miller want to determine t

23、he YTM for an issue of outstanding bonds at Basket Wonders (BW). BW has an issue of 10% annual coupon bonds with 15 years left to maturity. The bonds have a current market value of .4-39 = $100(PVIFA9%,15) + $1,000(PVIF9%, 15) = $100(8.061) + $1,000(.275) = $806.10 + $275.00=4-40 = $100(PVIFA7%,15)

24、+ $1,000(PVIF7%, 15) = $100(9.108) + $1,000(.362) = $910.80 + $362.00=4-41.07$1,273.02IRR$1,250 $192.09$1,081 X $23.02$192$23X=4-42.07$1,273.02IRR$1,250 $192.09$1,081 X $23.02$192$23X=4-43.07$1273.02 $192.09$1081($23)(0.02) $192$23XX =X = .0024 = .07 + .0024 = .0724 or 4-44P0 = 2t=1(1 + kd /2 )tI /

25、2= (I/2)(PVIFAkd /2, 2) + MV(PVIFkd /2 , 2) +MV 1 + (kd / 2)2 -1 = YTMDetermine the Yield-to-Maturity (YTM) for the semiannual coupon paying bond with a finite life.(1 + kd /2 )24-45 - The market required rate of return exceeds the coupon rate (Par P0 ). The coupon rate exceeds the market required r

26、ate of return (P0 Par). The coupon rate equals the market required rate of return (P0 = Par).4-46MARKET REQUIRED RATE OF RETURN (%)BOND PRICE ($)1000 Par16001400120060000 2 4 6 8 12 14 16 184-47Assume that the required rate of return on a 15 year, 10% coupon paying bond from 10% to 12%. What happens

27、 to the bond price?When interest rates , then the market required rates of return and bond prices will .4-48MARKET REQUIRED RATE OF RETURN (%)BOND PRICE ($)1000 Par16001400120060000 2 4 6 8 12 14 16 184-49Therefore, the bond price has from $1,000 to $864.10.The required rate of return on a 15 year,

28、10% coupon paying bond has from 10% to 12%.4-50Assume that the required rate of return on a 15 year, 10% coupon paying bond from 10% to 8%. What happens to the bond price?When interest rates , then the market required rates of return and bond prices will . 4-51MARKET REQUIRED RATE OF RETURN (%)BOND

29、PRICE ($)1000 Par16001400120060000 2 4 6 8 12 14 16 184-52Therefore, the bond price has from $1000 to $1171.The required rate of return on a 15 year, 10% coupon paying bond has from 10% to 8%.4-53Assume that the required rate of return on both the 5 and 15 year, 10% coupon paying bonds from 10% to 8

30、%. What happens to the changes in bond prices?The longer the bond maturity, the greater the change in bond price for a given change in the market required rate of return.4-54MARKET REQUIRED RATE OF RETURN (%)BOND PRICE ($)1000 Par16001400120060000 2 4 6 8 12 14 16 184-55The 5 year bond price has fro

31、m $1,000 to $1,080.30 for the 5 year bond (+8.0%).The 15 year bond price has from $1,000 to $1,171 (+17.1%). The required rate of return on both the 5 and 15 year, 10% coupon paying bonds has from 10% to 8%.4-56For a given change in the market required rate of return, the price of a bond will change

32、 by proportionally more, the the coupon rate.4-57Assume that the market required rate of return on two equally risky 15 year bonds is 10%. The coupon rate for Bond H is 10% and Bond L is 8%. What is the rate of change in each of the bond prices if market required rates fall to 8%?4-58The price for B

33、ond H will rise from $1,000 to $1,171 (+17.1%).The price for Bond L will rise from $847.88 to $1,000 (+17.9%). The price on Bond H and L prior to the change in the market required rate of return is $1,000 and $847.88 respectively.4-59Determine the yield for preferred stock with an infinite life.P0 =

34、 DivP / kP Solving for kP such thatkP = DivP / P0 4-60kP = $10 / $100. = .Assume that the annual dividend on each share of preferred stock is $10. Each share of preferred stock is currently trading at $100. What is the yield on preferred stock?4-61Assume the constant growth model is appropriate. Det

35、ermine the yield on the common stock.P0 = D1 / ( ke - g )Solving for ke such thatke = ( D1 / P0 ) + g 4-62ke = ( $3 / $30 ) + 5% = Assume that the expected dividend (D1) on each share of common stock is $3. Each share of common stock is currently trading at $30 and has an expected growth rate of 5%. What is the yield on common stock?