FINS3641: SECURITY ANALYSIS AND
VALUATION
CHAPTER XXVIII PROBLEM 1
Option to delay
A company is considering delaying a project with after-tax cash flows of $25 million but that
costs $300 million to take on. Life of the project is 20 years. Cost of capita
Chapter 9 The Capital Asset Pricing Model
Multiple Choice Questions
1. In the context of the Capital Asset Pricing Model (CAPM) the relevant measure of risk
is
A) unique risk.
B) beta.
C) standard deviation of returns.
D) variance of returns.
E) none of t
26/07/2012
Barrel of oil equivalent - Wikipedia, the free encyclopedia
Barrel of oil equivalent
From Wikipedia, the free encyclopedia
The barre l of oil e quivale nt (BOE) is a unit of energy based on the approximate energy released by burning
one barrel
FINS3641: SECURITY ANALYSIS AND
VALUATION
CHAPTER XIII PROBLEM 1
True or False:
A. The dividend discount model cannot be used to value a high-growth company that pays
no dividends.
False
The dividend discount model can still be used to value the dividends
FINS3641: SECURITY ANALYSIS AND
VALUATION
CHAPTER I MC QUESTION #1
The value of an investment is:
a) The present value of the cash flows on the investment
b) Determined by investor perceptions about it
c) Determined by demand and supply
d) Often a subject
FINS3641: SECURITY ANALYSIS AND
VALUATION
CHAPTER VII: PROBLEM 2
Explain why a sixmonth Treasury bill rate is not an appropriate riskless rate in discounting
a five year cash flow.
Because of reinvestment risk.
A sixmonth TBill is only riskless for six
FINS3641: SECURITY ANALYSIS AND
VALUATION
CHAPTER IX PROBLEM 1
Derra Foods reports $1 billion in book value of equity and has no debt, but it uses operating
leases for all of its stores. Its most recent payment was $85m, with future operating lease
commit
FINS3641: SECURITY ANALYSIS AND
VALUATION
CHAPTER XI PROBLEM 2
BIC Corporation reported a ROE of 20% and paid out 37% of its earnings as dividends in the
most recent year.
A. Assuming these fundamentals dont change, estimate the expected growth rate in ea
FINS3641: SECURITY ANALYSIS AND
VALUATION
CHAPTER XIII PROBLEM 1
True or False:
A. The dividend discount model cannot be used to value a high-growth company that pays
no dividends.
False
The dividend discount model can still be used to value the dividends
FINS3641: SECURITY ANALYSIS AND
VALUATION
CHAPTER XV PROBLEM 1
True or False?
FCFF is always higher than FCFE
FALSE
If the firm has no debt, FCFF and FCFE can be equal. If there are net debt issues FCFE can
be higher.
FCFF is the cumulated cash flow to al
FINS3641: SECURITY ANALYSIS AND
VALUATION
CHAPTER XVII PROBLEM 1
A. What is the difference between the ratios?
Current PE = Price / Current EPS
Uses EPS from last annual report
Trailing PE = Price / Trailing EPS
Includes quarterly results to form the mo
FINS3641: SECURITY ANALYSIS AND VALUATION
CHAPTER XI PROBLEM 2
BIC Corporation reported a ROE of 20% and paid out 37% of its earnings as dividends in the
most recent year.
A. Assuming these fundamentals dont change, estimate the expected growth rate in
ea
FINS3641: SECURITY ANALYSIS AND VALUATION
Week 4 Solutions
Derra Foods reports $1 billion in book value of equity and has no debt, but it uses operating
leases for all of its stores. Its most recent payment was $85m, with future operating lease
commitment
FINS3641: SECURITY ANALYSIS AND VALUATION
Week 3 Solutions
Explain why a sixmonth Treasury bill rate is not an appropriate riskless rate in discounting a
five year cash flow.
Because of reinvestment risk.
A sixmonth TBill is only riskless for six months
INITIATION | COMMENT
30 WEEKS
Rel. AUST ALL ORD.
14DEC07 - 02JUL08
HI-27JUN08 207.29
LO/HI DIFF 107.29%
180.00
150.00
CLOSE
202.93
120.00
2006
2007
2008
FM A M J J A S O N D J F M A M J J A S O N D J F M A M J J
LO-14DEC07 100.00
JULY 3, 2008
Northern Iro
14 August 2008
Europe/France/Germany/United Kingdom
Equity Research
Airlines (Travel & Leisure) / MARKET WEIGHT
European Network Airlines
Research Analysts
Nowhere to hide
We initiate coverage of Air France-KLM, British Airways and Lufthansa
with Underper
THE UNIVERSITY OF NEW SOUTH WALES
School of Banking and Finance
FINS3641: Security Analysis and Valuation
Session 2, 2012
Prepared by Henry Yip
FINS3641 Security Analysis and Valuation
Introduction
Todays Agenda
1) A brief overview of the course outline (
FINS3641 SECURITY ANALYSIS AND VALUATION
PART 2 - DISCOUNT CASH FLOW VALUATION MODELS
Week 3: Measuring Earnings and Estimating Free Cash Flows
Topics:
Free Cash Flows to the Firm (FCFF)
Learning Outcomes:
Learn the techniques to translate accounting ea
FINS3641 SECURITY ANALYSIS AND VALUATION
PART 2: DISCOUNT CASH FLOW VALUATION MODELS
Week 4: Estimating Growth and Terminal Value
Topics:
Estimating the growth rate to forecast future revenues and earnings
Estimating the terminal value of a firm
Learnin
FINS3641 SECURITY ANALYSIS AND VALUATION
PART 2
DISCOUNT CASH FLOW VALUATION MODELS
Week 6
Free Cash Flow to the Firm Discount Valuation Models & Firms with Negative Earnings
Prepared by Henry Yip
1
FINS3641 SAV
Week 6: FCFF Discount Models and Valuing Fi
FINS3641 SECURITY ANALYSIS AND VALUATION
PART 3: RELATIVE VALUATION MODELS
Week 8: Fundamental Principles and Earnings Multiples
Topics:
What is relative valuation?
How do we conduct relative valuation?
Learning Outcomes:
Learn the linkage between pric
FINS3641 SECURITY ANALYSIS AND VALUATION
PART 3: RELATIVE VALUATION MODELS
Week 9: Book Value and Revenue Multiples
Topics:
Price to book value
Firm value to book value
Price to Sales
Value to Sales
Learning Outcomes:
Learn how best to apply book val
FINS3641 SECURITY ANALYSIS AND VALUATION
PART 4
CONTINGENCY CLAIM VALUATION MODELS
Week 10
Valuing Options to Expand and to Abandon
Valuing Equity in Distressed Firms
Topics & Learning Outcomes:
Application of option pricing models to the valuation of
th