FINA4920-StockValuation

FINA4920-StockValuation - Click to edit Master subtitle...

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Unformatted text preview: Click to edit Master subtitle style 6/6/11 Stock Valuation in Excel FINA 4920 Computers in Finance 6/6/11 Differences Between Debt and Equity Debt aka Bond, Corporate Bond, Muni, long-term debt  Definition: a fixed-income security that firms use to raise money  Represents a claim on companys assets  Usually pays intermediate cash flows in the form of coupon payments Equity aka Stock, Common Stock, Share  Definition: a share in the ownership of a company  Represents a residual claim on the companys earnings and assets  Usually pays intermediate cash flows to investors in the form of dividends  buy a stock? you become 6/6/11 Valuing Stock  We arent going to follow the text strictly, although we will use some info from the following chapters Ch. 9 presents some initial stock valuation techniques We wont use all of the techniques in Ch. 9 We will cover most of Ch. 9 later Ch. 19 is solely dedicated to stock valuation We wont use all of the techniques in Ch. 19 6/6/11 Cash Flows for Stockholders  Valuing stocks is a bit different that valuing bonds  If you buy a share of stock, you can receive cash in two ways: If the company pays a dividend If you sell your shares, either to another investor in the market, or back to the company  As with bonds, the price of the stock is the price of these expected cash flows 6/6/11 Cash Flows for Stockholders 0 1 2 3 4 5 |----------|----------|----------|----------|----------| P0 * D1 P1 [ ] [ ] ( 29 1 1 D P P 1 t t E E r + = + 6/6/11 Cash Flows for Stockholders 0 1 2 3 4 5 |----------|----------|----------|----------|----------| P0 * D1 P1 D2 P2 [ ] ( 29 [ ] [ ] ( 29 1 2 2 2 D D P P 1 1 t t t E E E r r + = + + + 6/6/11...
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FINA4920-StockValuation - Click to edit Master subtitle...

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