Nyenrode Business Universiteit
Answers of study exercises
Valuation of Common Stocks
Valuation of Common Stocks
Basic exercises (1-4):
The DDM model assumes that the value of a share of stock equals the present value of its
expected future cash receipts.
Exam #1 Review Answers
1. Given the following probability distribution, calculate the expected return, variance and standard
deviation for Security J.
State
1
2
3
Prob
0.2
0.6
0.2
E(R)
10%
15
20
Expected return = 0.2*10% + 0.6*15% + 0.2*20% = 15%
Variance
FIN6130 MANAGERIAL FINANCE
MID-TERM 2
26 June 2014
Name : _
Matric: _
NOTICE TO STUDENTS:
1) Answer all questions in THIS QUESTION booklet.
2) Use ONLY formula/equation to answer the questions.
3) Draw time line/s and show your detailed workings.
1. Suppo
Definition of 'Trailing Price-To-Earnings - Trailing P/E'
The sum of a company's price-to-earnings, calculated by taking the current
stock price and dividing it by the trailing earnings per share for the past
12 months. This measure differs from forward P
RISK
The chance that an investments actual return will be different than expected. This includes the
possibility of losing some or all of the original investment. It is usually measured by calculating the
standard deviation of the historical returns or av
Stock Valuation Practice Problems
1. The Bulldog Company paid $1.5 of dividends this year. If its dividends are expected to grow at a
rate of 3 percent per year, what is the expected dividend per share for Bulldog five years from
today?
2. The current pri
Chapter 7
BOND & STOCK
VALUATION
Alex Tajirian
Bond & Stock Valuation
7-2
1. OBJECTIVE
#
Use PV to calculate what prices of stocks and bonds should be
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Basic bond terminology and valuation
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Stock and preferred stock valuation
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WSJ price quotation
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