Exam #1 CS.docx - r C PPV APV AFV ARP EAR F R h P0 Pt D0 D g EPS PE PS Interest rate rate of return discount rate real rate Cash amount annuity cash

Exam #1 CS.docx - r C PPV APV AFV ARP EAR F R h P0 Pt D0 D...

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r Interest rate, rate of return, discount rate, real rate C Cash amount, annuity, cash flow, coupon payment PPV Present value of perpetuity APV Present value of perpetuity AFV Future value of an annuity ARP Annual percentage rate EAR Effective annual rate F Face Value R Nominal interest rate, quoted rate, required return h Expected inflation rate P0 Current price of stock Pt Stock price in t periods D0 Dividend just paid D Cash flow g Dividend growth rate EPS Earnings per share PE Price-earnings (ratio) PS Price-sales (ratio) FV t = PV ( 1 + r ) t = C ( 1 + r ) t PV = FV t ( 1 + r ) t = C ( 1 + r ) t r = FV PV 1 t 1 t = ln FV PV ln ( 1 + r ) PPV = C r APV = C [ 1 1 ( 1 + r ) t r ] AFV t = C [ ( 1 + r ) t 1 r ] EAR =( 1 + APR m ) m 1 APR = m [ ( 1 + EAR ) 1 m 1 ] = rm Bond Value = C [ 1 1 ( 1 + YTM ) t YTM ] + F ( 1 + YTM ) t Semiannual BV = C 2 [ 1 1 ( 1 + YTM 2 ) 2 t YTM 2 ] + F ( 1 + YTM 2 ) 2 t C = Fr / 2 Fisher Effect → 1 + R = ( 1 + r ) ( 1 + h ) → R = r + h + rh →approximation→R≈r + h GeneralCase→P 0 = D 1 ( 1 + R ) 1 + D 2 ( 1 + R ) 2 + D 3 ( 1 + R ) 3 + = t = 1 ( 1 Constant Dividend/Zero Growth P 0 = D R Dividend Growth Model/Constant Dividend Growth P 0 = D 0 ( 1 + g ) R g = D 1 R g D t = D 0 ( 1 + g ) t Non-constant Dividend Growth P t = D t ( 1 + g ) R g = D t + 1 R g R = D 0 ( 1 + g ) P 0 + g = D 1 P 0 + g Stocks that Don’t Pay Dividends/Erratic Dividend Growth Rates P t =( Benchmark PE Ratio )( EPS t )=( Benchmark PS Ratio ) EPS = net income shares outstanding PE Ratio = price per share
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  • Spring '16
  • Islam Rizvanoghlu

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