Chapter 9 Formulas

Chapter 9 Formulas - P II Formulas • Value of Stock = • Constant Growth Stock= =[D(1 g 1(1 r S 1[D(1 g 2(1 r S 2[D(1 g 3(1 r S 3]… =(D 1(r S

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Chapter 9 Formulas: I. What Each Letter Stands for: = stock’s expected current value P 0 = stock’s current market price = both the expected price and the expected intrinsic value of the stock at the end of each Year t. Based on the investor’s estimates if the dividend stream and the riskiness of that stream. D 0 = the last dividend the company paid V p = current stock’s price S = realized rate of return ( - P 0 )/ P 0 = expected capital gains yield on the stock during the coming year Expected Total Return = S =
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Expected dividend yield (D 1 /P 0 ) + expected capital gains yield [( - P
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Unformatted text preview: )/ P ] II. Formulas: • Value of Stock () = • Constant Growth Stock= = [D (1+g) 1 / (1+r S ) 1 ] + [D (1+g) 2 / (1+r S ) 2 ] + [D (1+g) 3 / (1+r S ) 3 ]…. = (D 1 ) / (r S – g) • Expected Rate of Return = Expected Dividend Yield + Expected Growth Rate, or Capital Gains Yield S = (D 1 /P ) + g • Growth Rate = (1 – Payout Ratio)ROE • Zero Growth Stock = = D/r S • Market Value of Equity = Book Value + PV of all Future EVAs = V p = D p / r p p = D p / V p...
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This note was uploaded on 06/12/2011 for the course FINC 302 taught by Professor Lawrence during the Spring '11 term at Nicholls State.

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Chapter 9 Formulas - P II Formulas • Value of Stock = • Constant Growth Stock= =[D(1 g 1(1 r S 1[D(1 g 2(1 r S 2[D(1 g 3(1 r S 3]… =(D 1(r S

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