Equity_Valuation

Equity_Valuation - CHAPTER 18 Click to edit Master subtitle style Equity Valuation Models Models of Equity Valuation Balance Sheet Models Book

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Click to edit Master subtitle style  5/10/10 Equity Valuation  Models CHAPTER 18
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 5/10/10 Balance Sheet Models Book Value Dividend Discount Models Price/Earning Ratios Models of Equity Valuation
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 5/10/10 Table 18.1 Financial Highlights for  Microsoft Corporation, October 25, 2007
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 5/10/10 Limitations of Book Value Book value is an application of arbitrary  accounting rules Can book value represent a floor value? Better approaches Liquidation value Replacement cost
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 5/10/10 Expected Holding Period Return The return on a stock investment comprises  cash dividends and capital gains or losses Assuming a one-year holding period [ ] 1 1 0 0 ( ) ( ) Expected HPR= ( ) E D E P P E r P + - =
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 5/10/10 Required Return CAPM gave us required return: If the stock is priced correctly Required return should equal expected return
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 5/10/10 Intrinsic Value Self assigned Value Variety of models are used for estimation Market Price Consensus value of all potential traders Trading Signal IV > MP Buy IV < MP Sell or Short Sell IV = MP Hold or Fairly Priced Intrinsic Value and Market Price
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 5/10/10 PH  = the expected sales price for the stock at  time  H H  = the specified number of years the stock is  expected to be held Specified Holding Period
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This note was uploaded on 05/08/2010 for the course FIN 3826 taught by Professor Staff during the Spring '08 term at LSU.

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Equity_Valuation - CHAPTER 18 Click to edit Master subtitle style Equity Valuation Models Models of Equity Valuation Balance Sheet Models Book

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