公司理財精要版原書第12版英文版課件Ross-12e-Ch08

1、STOCK VALUATIONCHAPTER 8Copyright 2019 McGraw-Hill Education.All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.STOCK VALUATIONCHAPTER 8CopyriExplain how stock prices depend on future dividends and dividend growthShow how to value stocks u

2、sing multiplesLay out the different ways corporate directors are elected to officeDefine how the stock markets workKey Concepts and SkillsCopyright 2019 McGraw-Hill Education.All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.Explain how s

3、tock prices depenCommon Stock ValuationSome Features of Common and Preferred StocksThe Stock MarketsChapter OutlineCopyright 2019 McGraw-Hill Education.All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.Common Stock ValuationChapter If you

4、 buy a share of stock, you can receive cash in two ways:The company pays dividends.You sell your shares, either to another investor in the market or back to the company.As with bonds, the price of the stock is the present value of these expected cash flows.Cash Flows for StockholdersCopyright 2019 M

5、cGraw-Hill Education.All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.If you buy a share of stock, ySuppose you are thinking of purchasing the stock of Moore Oil, Inc. You expect it to pay a $2 dividend in one year, and you believe that

6、you can sell the stock for $14 at that time. If you require a return of 20% on investments of this risk, what is the maximum you would be willing to pay?Compute the PV of the expected cash flows.Price = (14 + 2) / (1.2) = $13.33Or FV = 16; I/Y = 20; N = 1; CPT PV = -13.33One-Period ExampleCopyright

7、2019 McGraw-Hill Education.All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.Suppose you are thinking of puNow, what if you decide to hold the stock for two years? In addition to the dividend in one year, you expect a dividend of $2.10 in

8、 two years and a stock price of $14.70 at the end of year 2. Now how much would you be willing to pay?PV = 2 / (1.2) + (2.10 + 14.70) / (1.2)2 = 13.33Two-Period ExampleCopyright 2019 McGraw-Hill Education.All rights reserved. No reproduction or distribution without the prior written consent of McGra

9、w-Hill Education.Now, what if you decide to holFinally, what if you decide to hold the stock for three years? In addition to the dividends at the end of years 1 and 2, you expect to receive a dividend of $2.205 at the end of year 3 and the stock price is expected to be $15.435. Now how much would yo

10、u be willing to pay?PV = 2 / 1.2 + 2.10 / (1.2)2 + (2.205 + 15.435) / (1.2)3 = 13.33Three-Period ExampleCopyright 2019 McGraw-Hill Education.All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.Finally, what if you decide toYou could continu

11、e to push back the year in which you will sell the stock.You would find that the price of the stock is really just the present value of all expected future dividends.So, how can we estimate all future dividend payments?Developing The ModelCopyright 2019 McGraw-Hill Education.All rights reserved. No

12、reproduction or distribution without the prior written consent of McGraw-Hill Education.You could continue to push bacConstant dividend (i.e., zero growth)The firm will pay a constant dividend forever.This is like preferred stock.The price is computed using the perpetuity formula.Constant dividend g

13、rowthThe firm will increase the dividend by a constant percent every period.The price is computed using the growing perpetuity model.Supernormal growthDividend growth is not consistent initially, but settles down to constant growth eventually.The price is computed using a multistage model.Estimating

14、 Dividends: Special CasesCopyright 2019 McGraw-Hill Education.All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.Constant dividend (i.e., zero If dividends are expected at regular intervals forever, then this is a perpetuity, and the prese

15、nt value of expected future dividends can be found using the perpetuity formula.P0 = D / RSuppose a stock is expected to pay a $0.50 dividend every quarter and the required return is 10% with quarterly compounding. What is the price?P0 = .50 / (.1 / 4) = $20Zero GrowthCopyright 2019 McGraw-Hill Educ

16、ation.All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.If dividends are expected at rDividends are expected to grow at a constant percent per period.P0 = D1 /(1+R) + D2 /(1+R)2 + D3 /(1+R)3 + P0 = D0(1+g)/(1+R) + D0(1+g)2/(1+R)2 + D0(1+g

17、)3/(1+R)3 + With a little algebra and some series work, this reduces to:Dividend Growth ModelCopyright 2019 McGraw-Hill Education.All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.Dividends are expected to growSuppose Big D, Inc., just pa

18、id a dividend of $0.50 per share. It is expected to increase its dividend by 2% per year. If the market requires a return of 15% on assets of this risk, how much should the stock be selling for?P0 = .50(1+.02) / (.15 - .02) = $3.92DGM Example 1Copyright 2019 McGraw-Hill Education.All rights reserved

19、. No reproduction or distribution without the prior written consent of McGraw-Hill Education.Suppose Big D, Inc., just paidSuppose TB Pirates, Inc., is expected to pay a $2 dividend in one year. If the dividend is expected to grow at 5% per year and the required return is 20%, what is the price?P0 =

20、 2 / (.2 - .05) = $13.33Why isnt the $2 in the numerator multiplied by (1.05) in this example?DGM Example 2Copyright 2019 McGraw-Hill Education.All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.Suppose TB Pirates, Inc., is eStock Price Se

21、nsitivity to Dividend Growth, gD1 = $2; R = 20%Copyright 2019 McGraw-Hill Education.All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.Stock Price Sensitivity to DivStock Price Sensitivity to Required Return, RD1 = $2; g = 5%Copyright 2019

22、 McGraw-Hill Education.All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.Stock Price Sensitivity to ReqGordon Growth Company is expected to pay a dividend of $4 next period, and dividends are expected to grow at 6% per year. The required

23、return is 16%.What is the current price?P0 = 4 / (.16 - .06) = $40Remember that we already have the dividend expected next year, so we dont multiply the dividend by 1+g.Example 8.3: Gordon Growth Company - ICopyright 2019 McGraw-Hill Education.All rights reserved. No reproduction or distribution wit

24、hout the prior written consent of McGraw-Hill Education.Gordon Growth Company is expecWhat is the price expected to be in year 4?P4 = D4(1 + g) / (R g) = D5 / (R g)P4 = 4(1+.06)4 / (.16 - .06) = 50.50What is the implied return given the change in price during the four year period?50.50 = 40(1+return

25、)4; return = 6%PV = -40; FV = 50.50; N = 4; CPT I/Y = 6%The price is assumed to grow at the same rate as the dividends.Example 8.3: Gordon Growth Company - IICopyright 2019 McGraw-Hill Education.All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Edu

26、cation.What is the price expected to Suppose a firm is expected to increase dividends by 20% in one year and by 15% in two years. After that, dividends will increase at a rate of 5% per year indefinitely. If the last dividend was $1 and the required return is 20%, what is the price of the stock?Reme

27、mber that we have to find the PV of all expected future dividends.Nonconstant Growth Example - ICopyright 2019 McGraw-Hill Education.All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.Suppose a firm is expected to Compute the dividends unt

28、il growth levels off.D1 = 1(1.2) = $1.20D2 = 1.20(1.15) = $1.38D3 = 1.38(1.05) = $1.449Find the expected future price.P2 = D3 / (R g) = 1.449 / (.2 - .05) = 9.66Find the present value of the expected future cash flows.P0 = 1.20 / (1.2) + (1.38 + 9.66) / (1.2)2 = 8.67Nonconstant Growth Example - IICo

29、pyright 2019 McGraw-Hill Education.All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.Compute the dividends until grWhat is the value of a stock that is expected to pay a constant dividend of $2 per year if the required return is 15%?What

30、if the company starts increasing dividends by 3% per year, beginning with the next dividend? The required return stays at 15%.Quick Quiz Part ICopyright 2019 McGraw-Hill Education.All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.What is

31、the value of a stock tStart with the DGM:Using the DGM to Find RCopyright 2019 McGraw-Hill Education.All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.Start with the DGM:Using the DSuppose a firms stock is selling for $10.50. It just paid

32、 a $1 dividend, and dividends are expected to grow at 5% per year. What is the required return?R = 1(1.05)/10.50 + .05 = 15%What is the dividend yield?1(1.05) / 10.50 = 10%What is the capital gains yield?g = 5%Example: Finding the Required Return Copyright 2019 McGraw-Hill Education.All rights reser

33、ved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.Suppose a firms stock is sellAnother common valuation approach is to multiply a benchmark PE ratio by earnings per share (EPS) to come up with a stock price.Pt = Benchmark PE ratio EPStThe benchmark PE ra

34、tio is often an industry average or based on a companys own historical values.The price-sales ratio can also be used.Stock Valuation Using MultiplesCopyright 2019 McGraw-Hill Education.All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.Ano

35、ther common valuation approSuppose a company had earnings per share of $3 over the past year. The industry average PE ratio is 12.Use this information to value this companys stock price.Pt = 12 $3 = $36 per shareExample: Stock Valuation Using Multiples Copyright 2019 McGraw-Hill Education.All rights

36、 reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.Suppose a company had earningsTable 8.1 Stock Valuation Summary (1)Copyright 2019 McGraw-Hill Education.All rights reserved. No reproduction or distribution without the prior written consent of McGr

37、aw-Hill Education.Table 8.1 Stock Valuation SuTable 8.1 Stock Valuation Summary (2)Copyright 2019 McGraw-Hill Education.All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.Table 8.1 Stock Valuation SuVoting RightsProxy votingClasses of stoc

38、kOther RightsShare proportionally in declared dividendsShare proportionally in remaining assets during liquidationPreemptive right first shot at new stock issue to maintain proportional ownership if desiredFeatures of Common StockCopyright 2019 McGraw-Hill Education.All rights reserved. No reproduct

39、ion or distribution without the prior written consent of McGraw-Hill Education.Voting RightsFeatures of CommoDividends are not a liability of the firm until a dividend has been declared by the Board.Consequently, a firm cannot go bankrupt for not declaring dividends.Dividends and TaxesDividend payme

40、nts are not considered a business expense; therefore, they are not tax deductible.The taxation of dividends received by individuals depends on the holding period.Dividends received by corporations have a minimum 70% exclusion from taxable income.Dividend CharacteristicsCopyright 2019 McGraw-Hill Edu

41、cation.All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.Dividends are not a liability DividendsStated dividend that must be paid before dividends can be paid to common stockholdersDividends are not a liability of the firm, and preferred

42、dividends can be deferred indefinitely.Most preferred dividends are cumulative any missed preferred dividends have to be paid before common dividends can be paid.Preferred stock generally does not carry voting rights.Features of Preferred StockCopyright 2019 McGraw-Hill Education.All rights reserved

43、. No reproduction or distribution without the prior written consent of McGraw-Hill Education.DividendsFeatures of PreferredDealers vs. BrokersNew York Stock Exchange (NYSE)Largest stock market in the worldLicense holders (1,366)Designated market makers (DMMs)Floor brokersSupplemental liquidity provi

44、ders (SLPs)OperationsFloor activityStock MarketCopyright 2019 McGraw-Hill Education.All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.Dealers vs. BrokersStock MarkeNot a physical exchange computer-based quotation systemMultiple market mak

45、ersElectronic Communications NetworksThree levels of informationLevel 1 median quotes, registered representativesLevel 2 view quotes, brokers, and dealersLevel 3 view and update quotes, dealers onlyLarge portion of technology stocksNASDAQCopyright 2019 McGraw-Hill Education.All rights reserved. No r

46、eproduction or distribution without the prior written consent of McGraw-Hill Education.Not a physical exchange compElectronic Communications Networks provide trading in NASDAQ securities.To see more detail, visit Instinet.Work the Web ExampleCopyright 2019 McGraw-Hill Education.All rights reserved.

47、No reproduction or distribution without the prior written consent of McGraw-Hill Education.Electronic Communications NetwReading Stock QuotesWhat information is provided in the stock quote?You can go to Bloomberg for current stock quotes.Copyright 2019 McGraw-Hill Education.All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.Reading Stock QuotesWhat inforYou observe a stock price of $18.75. You expect a dividend growth rate of 5%, and the most recent dividend was $1.50. Wha