Examples_Stock_Class

Examples_Stock_Class - 1 Demonstration of business...

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1 Discount Rate 12% Growth Rate 4% Current Dividend $1 Stock Price $13.00 Dividends in 4th year 1.17 in 3 years 14.12 Price in year 3 29.25 2 Discount Rate 15% ROE 15% EPS $6 Plowback Ratio 0% 40% 60% Growth Rate 0% 6% 9% Dividends 6.00 3.60 2.40 Stock Price $40.00 $40.00 $40.00 3 ROE 20% Plowback Ratio 0% 40% 60% Growth Rate 0% 8% 12% Dividends 6.00 3.60 2.40 Stock Price 40.00 51.43 80.00 PVGO 11.43 28.57 (TB 6.11) IPC paid a $1 per share dividend yesterday. You expect the dividend grow at a rate of 4% p discount rate is 12%, what is the current price? What is the expected stock price 3 years from now? (Tb 6.18) Metatrends stock will generate earnings of $6 per share this year. The discount rate is 15%, on reinvested earnings is also 15%. Find the stock price if the company reinvests the following fraction firm: 0%, 40% and 60%. (Tb 6.18) Redo the above question assuming that the rate of return on reinvested earnings is 20%. Als value of growth opportunities for each reinvestment rate.
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per year. If the , and the rate of return ns of earnings in the lso find the present
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Unformatted text preview: 1 Demonstration of business valuation (presentation example) Discount Rate 10% Terminal Growth 6% 1 2 3 4 5 6 7 Asset Value 10.00 12.00 14.40 17.28 20.74 23.43 26.47 Earnings 1.20 1.44 1.73 2.07 2.49 2.81 3.18 Net Investment 2.00 2.40 2.88 3.46 2.69 3.04 1.59 Free Cash Flow (0.80) (0.96) (1.15) (1.38) (0.20) (0.23) 1.59 Growth Rate 20% 20% 20% 20% 20% 13% 13% Horizon: 10 years Horizon: 8 years Terminal Value Terminal Value Termi PV of TV PV of TV PV of Cash Flows PV of Cash Flows PV of Ca Total Value Total Value- To 2 Calculation of terminal value (at year 6) under alternative assumptions P/E is M/B is 5% 7% 11 1.4 Terminal Value 31.7 52.9 - PV of TV 17.9 29.9 - - - - PV of Cash Flows- - - - - - Total Value 17.92 29.87 - - - - 3 Sensitivity to discount rate- 9%- 10%- 11%- 12%- Growth Rate Growth Rate Bench-mark No growth after year 8 8 9 10 28.06 29.74 31.53 3.37 3.57 3.78 1.69 1.79 1.89 1.68 1.78 1.89 6% 6% 6% Horizon: 6 years inal Value PV of TV ash Flows otal Value-...
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Examples_Stock_Class - 1 Demonstration of business...

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