dividends - AnalysisofDividendPolicy Objective 1. To...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
Analysis of Dividend Policy Objective 1. To compare how much a firm has returned to its stockholder historically (up to 10 years) with how much it could have returned. 2. To provide an assessment of project quality (ROE compared to cost of equity) and stock price performance over the period. 3. To provide forecasts of how much cash the firm will have available for stock buybacks in the future Inputs need For historical analysis: a. Net Income b. Depreciation, amortization and other non-cash charges c. Capital expenditures: Please include acquisitions as part of capital expenditures d. Non-cash working capital changes In entering these numbers, please make sure that you get the signs right (check the comment box on each of these inputs) e. Dividends: Only cash dividends should be shown here (ignore stock dividends) f. Stock Buybacks: Include the cash flow associated with stock buybacks. For project assessment and stock price performance analysis a. Beta: You should really use an average beta over the historical period, but go ahead and use your current beta if you do not have this. b. Book Value of Equity: To compute return on equity. c. Return on the stock: This is the total return you would have made as an investor: It includes price appreciation + dividend yield each year d. Riskfree rate: The one-year government security rate at the start of each year (use the T.Bill rate) e. Return on Stock Market: This is the total return on the stock market each year (You can get the last two from the worksheet that is part of this spreadsheet that reports historical data on both) For forecasts a. Expected growth rates in net income, dividends, depreciation, capital expenditures and revenues b. Working capital as a percent of revenues c. Debt as a percent of reinvestment, looking forward. As a default, you can use your historical average. Output Historical Analysis 1. FCFE and Cash Returned each year for the historical period 2. Returns on equity, the stock and your required return each year for the historical period 3. Averages of both over the entire period Forecasts 1. Forecasted FCFE for next 5 years 2. Forecasted dividends for next 5 years 3. Cash available each year for stock buybacks for next 5 years.
Background image of page 1

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

View Full DocumentRight Arrow Icon
Section 1: Inputs for estimating Dividends and FCFE How many years of historical data do you have available? 10 (number of years)
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 01/29/2012 for the course FIN 6000 taught by Professor Banko during the Fall '11 term at University of Florida.

Page1 / 5

dividends - AnalysisofDividendPolicy Objective 1. To...

This preview shows document pages 1 - 3. Sign up to view the full document.

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