chapter 11 ppt - CHAPTER 11 Stock Valuation and Risk 1...

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1 CHAPTER 11 Stock Valuation and Risk
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2 CHAPTER 11 OVERVIEW This chapter will: A. Explain methods of valuing stocks and determining the stock required rate of return B. Identify the factors that affect stock prices C. Explain how analysts affect stock prices D. Explain how to measure the risk of stocks E. Explain the concept of stock market efficiency
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3 A. Stock Valuation Methods 1. Price-Earnings (PE) Method a. Reasons for Different Valuations b. Limitations of the PE Method Valuation = Expected x Mean industry per share earnings PE ratio
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4 A. Stock Valuation Methods 2. Dividend Discount Model a. Relationship between Dividend Discount Model and PE Ratio for Valuing Firms b. The Dividend Discount Model where t = period D t =dividend in period t k = discount rate 1 1 t t t k D P
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5 A. Determining the Required Rate of Return to Value Stocks 3. Capital Asset Pricing Model a. Estimating the Risk-Free Rate and the Market Risk Premium b. Estimating the Firm’s Beta c. Limitations of the CAPM 4. Arbitrage Pricing Model
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chapter 11 ppt - CHAPTER 11 Stock Valuation and Risk 1...

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