fm3_chapter02

fm3_chapter02 - A 1 2 3 4 5 Current share price, P0 Current...

Info iconThis preview shows pages 1–12. Sign up to view the full content.

View Full Document Right Arrow Icon
THE GORDON MODEL COST OF EQUITY 60 3 Anticipated dividend growth rate 12% 17.60% #MACRO? Current share price, P 0 Current dividend, D 0 Gordon model cost of equity, r E A B C 1 2 3 4 5
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
KELLOGG DIVIDENDS, MAY1996 - MAY2006 Dividend growth rate, quarterly last 5 years 0.47% #MACRO? last 10 years 0.89% #MACRO? Dividend growth rate, annualized Last 5 years 1.90% #MACRO? Last 10 years 3.61% #MACRO? Date Dividends 29-May-96 0.195 28-Aug-96 0.210 26-Nov-96 0.210 27-May-04 0.253 27-Aug-04 0.253 23-Nov-04 0.253 25-Feb-05 0.253 27-May-05 0.253 30-Aug-05 0.278 29-Nov-05 0.278 27-Feb-06 0.278 30-May-06 0.278 A B C 1 2 3 4 5 6 7 8 9 10 11 12 13 43 44 45 46 47 48 49 50 51
Background image of page 2
48.28 Current dividend Quarterly 0.28 1.11 #MACRO? Last 5 years 1.90% Last 10 years 3.61% Using last 5 years' growth 4.25% #MACRO? Using last 10 years' growth 6.00% #MACRO? COMPUTING KELLOGG'S r E WITH THE GORDON MODEL Kellogg stock price, P 0, 30 May 2006 Annualized dividend, Div 0 Dividend growth rate, g Gordon model cost of equity r E A B C 1 2 3 4 5 6 7 8 9 10 11 12
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
JOHNSON & JOHNSON, CASH FLOW TO EQUIT Year ending Dividends Stock issues 31-Dec-95 827,000,000 322,000,000 -112,000,000 31-Dec-96 974,000,000 412,000,000 -149,000,000 31-Dec-97 1,137,000,000 628,000,000 -225,000,000 31-Dec-98 1,305,000,000 930,000,000 -269,000,000 31-Dec-99 1,479,000,000 840,000,000 -221,000,000 31-Dec-00 1,724,000,000 973,000,000 -387,000,000 31-Dec-01 2,047,000,000 2,570,000,000 -514,000,000 31-Dec-02 2,381,000,000 6,538,000,000 -390,000,000 31-Dec-03 2,746,000,000 1,183,000,000 -311,000,000 31-Dec-04 3,251,000,000 1,384,000,000 -642,000,000 31-Dec-05 3,793,000,000 1,717,000,000 -696,000,000 End 2005 equity data Stock price 61.07 Number of shares 3,119,842,000 Equity value 190,528,750,940 #MACRO? Equity cash flow, end 2005 4,814,000,000 #MACRO? Future growth rate Based on 10-year growth rate 16.59% #MACRO? Based on 5-year growth rate 15.82% Based on 10-year growth rate 19.54% #MACRO? Based on 5-year growth rate 18.75% #MACRO? For x-axes on graph y-axes 35,064 8,529,000,000 38,717 -696,000,000 Repurchase of common stock Gordon cost of equity, r E Note : Stock issues are proceeds from issuance of stock options (most to employees) A B C D 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49
Background image of page 4
A B C D 50
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
ITY, 1995-2005 1,037,000,000 #MACRO? 1,237,000,000 19.29% #MACRO? 1,540,000,000 24.49% #MACRO? 1,966,000,000 27.66% #MACRO? 2,098,000,000 6.71% 2,310,000,000 10.10% 4,103,000,000 77.62% 8,529,000,000 107.87% 3,618,000,000 -57.58% 3,993,000,000 10.36% 4,814,000,000 20.56% Cash flow to equity Year on year growth 1995 1996 1997 1998 1999 2000 2001 2002 2003 20 -1,000,000,000 0 1,000,000,000 2,000,000,000 3,000,000,000 4,000,000,000 5,000,000,000 6,000,000,000 7,000,000,000 8,000,000,000 9,000,000,000 JNJ, CASH FLOW TO EQUITY, 1995-2005 Column B Column C Column D Column E E F G H I J K L 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49
Background image of page 6
E F G H I J K L 50
Background image of page 7

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
004 2005 M N 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49
Background image of page 8
M N 50
Background image of page 9

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
61.07 Current dividend Quarterly 0.33 #MACRO? 1.32 #MACRO? Quarterly Annualized Growth since 17-Nov-00 3.69% 15.58% #MACRO? Growth since 14-Nov-03 4.06% 17.26% #MACRO? Growth since 17-Nov-00 18.08% #MACRO? Growth since 14-Nov-03 19.79% #MACRO? Date 17-Nov-00 0.160 15-Feb-01 0.160 18-May-01 0.180 17-Aug-01 0.180 16-Nov-01 0.180 14-Feb-02 0.180 17-May-02 0.205 16-Aug-02 0.205 15-Nov-02 0.205 13-Feb-03 0.205 16-May-03 0.240 15-Aug-03 0.240 14-Nov-03 0.240 12-Feb-04 0.240 14-May-04 0.285 13-Aug-04 0.285 12-Nov-04 0.285 11-Feb-05 0.285 13-May-05 0.330 19-Aug-05 0.330 18-Nov-05 0.330 COMPUTING JNJ's r E BASED ON DIVIDENDS PER SHARE JNJ's stock price, P 0, 31 Dec 2005 Annualized dividend, Div 0 Dividend growth rate, g Gordon model cost of equity r E Dividend per share A B C D 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36
Background image of page 10
THE GORDON MODEL W 8.00 35% 8% Number of supernormal growth years, m 5 Cost of equity 18% Dividend valuation PV of supernormal growth years Using Excel NPV 60.99 Check: Using book formula 60.99 PV of normal growth years, after year 5 169.35 Share value 230.33 Year 1 10.80 2 14.58 3 19.68 4 26.57 5 35.87 6 38.74
Background image of page 11

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 12
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 179

fm3_chapter02 - A 1 2 3 4 5 Current share price, P0 Current...

This preview shows document pages 1 - 12. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online