1.10 Student%20Week%205%20lect%201%20Stock%20Valuation%20%e2%80%93%20part%201%20rev.ppt

# 1.10 Student%20Week%205%20lect%201%20Stock%20Valuation%20%e2%80%93%20part%201%20rev.ppt

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Stock Valuation – part 1 Week 5 Lecture 1

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Basic Valuation From the time value of money we realize that the  value of anything is based on the present value  of the cash flows the asset is expected to  produce in the future Today:  Common Stock
Facts about common stock Represents _____________ __________ implies ___________ ____________ elect ___________ ____________ elect ______________ Management’s goal:  _____________________________________ ____________

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The value of financial assets n n 2 2 1 1 r) (1 CF     ...     r) (1 CF     r) (1 CF     Value + + + + + + = 0 1 2 n r% CF 1 CF n CF 2 Value ... CF t  = the cash flow expected to be generated by  the asset in period t
Stock Valuation:  P = PV Discount Cash Flows What are those cash flows? _____________ _______________  What is the discount rate? _______________________

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Stock Valuation Models: Cash  Flow Dividend:  _________________ paid to  equityholders of the firm Capital gains:  ______________________ _______________________.  Capital gains  reflects the difference between the  ______________ and ________________ of  the stock.
Stock Valuation Models: Cash Flow Cash Flow = Expected Dividends  (plus expected  Capital Gains) investors among differ may estimates the so values, expected are dividends future All years two of end at the expected dividend the is D year this of end at the paid be it will and paid, be to expected dividend next the is Div D paid already dividend recent most the is D Year t of end at the receive to expects r stockholde the dividend D 2 1 1 0 t = =

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Stock Valuation Models - returns Terms:   Dividend Yield
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## This note was uploaded on 12/23/2009 for the course BCOM FINC 201 taught by Professor Debrak.reed during the Spring '09 term at Canterbury.

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1.10 Student%20Week%205%20lect%201%20Stock%20Valuation%20%e2%80%93%20part%201%20rev.ppt

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