大二上財(cái)務(wù)管理課件00lecture04a valuing stock

Lecture6-

TopicsStocksandtheStockSimplifyingtheDividendDiscountDividendDiscountModelwithValuationwithShare CashFlowValuationValuationMarketMarketAnomaliesandBehavioral Copyright?2007byTheMcGraw-HillCompanies,Inc.All6-

Stocks&StockPrimaryMarket- cewherethesaleofnewstockfirstoccurs.InitialPublicOffering(IPO)-Firstofferingofstocktothegeneralpublic.SeasonedIssue-SaleofnewsharesbyafirmthathasalreadybeenthroughanIPO配股（Right Copyright?2007byTheMcGraw-HillCompanies,Inc.All6-

Stocks&StockSecondaryMarket-marketinwhichalreadyissuedsecuritiesaretradedbyinvestors.AuctionMarketDealerMarket,specialist–Oddlot- Copyright?2007byTheMcGraw-HillCompanies,Inc.All6-

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Stocks&StockCommonStock-OwnershipsharesinapubliclyheldPreferDividend-Periodiccashdistributionfromthefirmtotheshareholders.P/ERatio-Pricepersharedividedbyearningsper Copyright?2007byTheMcGraw-HillCompanies,Inc.All6-

Stocks&StockBookValue-Networthofthefirmaccordingtothebalancesheet.payingoffitsLiquidationValue-Netproceedsthatwouldberealized thepayingoffitsandMarketValueBalanceSheet-Financialstatementthatusesmarketvalueofand Copyright?2007byTheMcGraw-HillCompanies,Inc.All6-

ExpectedReturn-Thepercentageyieldthataninvestorforecastsfromaspecificinvestmentoverasetperiodoftime.Sometimescalledtheholdingperiodreturn(HPR).TheformulacanbebrokenintotwoDividendYield+Capital Copyright?2007byTheMcGraw-HillCompanies,Inc.AllStockStockPrices,Returns,andtheInvestmentHorizonDividendYields,CapitalGains,andTotalDiv1P1TheexpectedannualdividendoftheTheexpectedannualdividendofthestockdividedbycurrentpriceThedifferentbetweentheexpectedsalepriceandpurchasepriceofthestock.TotalReturns=ThesumofthedividendyieldandcapitalgainTheexpectedtotalreturnofthestockshouldequaltheexpectedreturnofotherinvestmentsavailable 9Ex.Ex.StockPricesandRt*(1) D

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TopicsStocksandtheStockSimplifyingtheDividendDiscountDividendDiscountModelwithValuationwithShare CashFlowValuationValuationMarketMarketAnomaliesandBehavioral

Copyright?2007byTheMcGraw-HillCompanies,Inc.AllStockPrices,Returns,thetheInvestmentAOne-Year iscurrentmarketprice isthenewmarketthetotaldividendspaidpershareofthestockduringtheyearequitycostofcapitalBasicPrinciple:Tovalueastock,weneedtoknowtheexpectedcashflowsaninvestorwillreceiveandtheappropriatecostofcapitalwithwhichtodiscountthecashflows.Bothofthese tiescanbechallengingto ArbitrageandtheLawofOneArbitrage:Thepracticeofbuyingandsellingequivalentgoodsindifferentmarketstotakeadvantageofapricedifference.LawofOneIfequivalentinvestmentopportunitiestradesimultaneouslyindifferentcompetitivemarkets,thentheymusttradeforthesamepriceinboth=>Whenevaluatingcostsandbenefitstocomputeanetpresentvalue,wecanuseanycompetitivepricetodetermineacashvalue,withoutcheckingthepriceinallpossiblemarkets.ValueThevalueofaportfolioisequaltothesumofthevaluesofitsparts.Thepriceorvalueoftheentirefirmisequaltothesumofthevaluesofall roectsandinvestmentswithinthefirm.Financialtransactionsarenotsourcesofvalue,butmerelyservetoadjustthetimingandriskofthecashflowstobestsuittheneedsofthefirmoritsinvestors.NoArbitragePriceofaPrice=PV(AllcashflowspaidbytheTheNo‐ArbitragePriceofaRiskyRiskPremiumsdependonRiskandRiskRiskisrelativetotheoverallTheNetPresentValueoftradingasecurityinanormal(competitive)marketiszero.RiskInvestorsprefertohaveasafe eratherthanariskyoneofthesameaverageamount.Sinceinvestorsareriskaverse,therisk‐interestrateisnottherightratetousewhendiscountingriskycashflowsacrosstime.ThemarketriskpremiumisIfthesecurityishalfasriskyasthemarket,thentherisk‐premiumforthesecurityshouldbehalfofthemarketriskpremium.StockStockPrices,Returns,andtheInvestmentHorizonAMulti-YearForthehorizonN,thestockpriceasfollowingDividendDiscountsharevalueequalsthepresentvalueofallexpectedfutureWeletNgotoThepriceofthestockisequaltothepresentvalueoftheexpectedfuturedividendsitwillpay. 6-

Currentforecastsarefor toyouanticipatesellingyourstockatamarketdividendsof$3,youanticipatesellingyourstockatamarketof$94.48.Whatisthepriceofthestockgiven12%expected Copyright?2007byTheMcGraw-HillCompanies,Inc.All6-

yearsyouanticipatesellingyourstockatamarketyearsyouanticipatesellingyourstockatamarketpriceof$94.48.Whatisthepriceofthestockgivena12%expectedreturn?PV

3.50(1 (1PV

(1 Copyright?2007byTheMcGraw-HillCompanies,Inc.All6-

willthenvaluethestockasaEstimatingthedividendsinthedividend-discountmodel-especiallyforthedistantfuture-isdifficult.IfweforecastnorowthandwillthenvaluethestockasaPerpetuityP

Div1

Assumesallearningsarepaidtoshareholders.

Withoutgrowth,P/E= Copyright?2007byTheMcGraw-HillCompanies,Inc.All6-

TopicsStocksandtheStockSimplifyingtheDividendDiscountDividendDiscountModelwithValuationwithShare CashFlowValuationValuationMarketMarketAnomaliesandBehavioral Copyright?2007byTheMcGraw-HillCompanies,Inc.All6-

ConstanGrowthDividendDiscountModelGrowth-AversionofthedividendgrowthmodelinwhichdividendsgrowataconstantGrowth0

rGivenanycombinationofvariablesintheequation,youcansolvefortheunknownvariable. Copyright?2007byTheMcGraw-HillCompanies,Inc.AllTheTheDividend-DiscountEstimatingthedividendsinthedividend-discountmodel-especiallyforthedistantfuture-isdifficult.Acommonapproximationistoassumethatinthelongrun,dividendswillgrowataconstantrate.BasedonConstantDividendGrowth6-

Whatisthevalueofastockthatexpectstopay$3.00dividendnextyear,andthenperpetuallyincrethed eof8%peryear,indefiniy?Assumea12%expectedreturn.P

r Copyright?2007byTheMcGraw-HillCompanies,Inc.All6-

Ifthesamestockissellingfor$100inthestockmarket,whatmightthemarketbeassumingaboutthegrowthindividends?$100.12

Themarketisassumingthedividendwillgrowg 9%peryear, Copyright?2007byTheMcGraw-HillCompanies,Inc.All6-

PayoutRatio-FractionofearningspaidoutasPlowbackRatio-Fractionofearningsretainedbythe Ifafirmelectstopayalowerdividend,andreinvestthefunds,thestockpricemayincreasebecausefuturedividendsmaybehigher.(ifROA>equitycostofcapital) Copyright?2007byTheMcGraw-HillCompanies,Inc.All6-

SustainableGrowthRate-SteadyrateatwhichafirmcangrowGrowthcanbederivedfromapplyingthereturnonequitytothepercentageofearningsplowedbackintooperations.g=returnonequity×plowbackTheequationshowsthatafirmcanincreaseitsgrowthratebymoreofits Copyright?2007byTheMcGraw-HillCompanies,Inc.All6-

witha12%expectedreturn.Instead,we lowback40%oftheearningsatthewitha12%expectedreturn.Instead,we lowback40%oftheearningsatthefirm’scurrentreturnonequityof20%.Whatisthevalueofthestockbeforeandaftertheplowbackdecision? Copyright?2007byTheMcGraw-HillCompanies,Inc.All6-

forecaststopaya$5.00dividendnextyear,whichrepresents100%ofitsearnings.Thiswillprovideinvestorswitha12%expectedreturn.Instead,wedecidetoblowback40%oftheearningsatthefirm’scurrentreturnonequityof20%.Whatisthevalueothestockbeoreandaterthe lowbackdecision?No With0P5 g.20.400 P0.12.08 Copyright?2007byTheMcGraw-HillCompanies,Inc.AllEx.Ex.CuttingDividendsforProfitableGrowthEx.CuttingDividendsforProfitableGrowthduetoROE>equitycostof6-

PresentValueofGrowthOpportunities(PVGO)-Netpresentvalueofafirm’sfutureinvestments.Examplethestockpricewouldremainat$60.00.Withtheplowback,thepriceroseto$64.29.thestockpricewouldremainat$60.00.Withtheplowback,thepriceroseto$64.29.GrowthOpportunitiesThedifferencebetweenthesetwonumbersGrowthOpportunities

Copyright?2007byTheMcGraw-HillCompanies,Inc.AllEx.Unprofitable新增投資方案ROE TheDividend-DiscountModelTheDividend-DiscountModelwithTheconstantdividendgrowthEx.Ex.ValuingaFirmwithTwoDifferentGrowthRatesEx.ValuingaFirmwithTwoDifferentGrowthRatesLimitationLimitationTheDividend-DiscountLimitationsoftheDividend-Discount-Valuesthestockbasedonaforecastofthefuturedividends toshareholders.(atremendousamountofuncertainty!)Inearly2006,KennethColeProductions(KCP)paidannualdividendsP0 E0.11$0.72.Withanequitycostofcapitalof11%andexpecteddividendgrowthof8%,theconstantdividendP0 E0.11(plowbackratioandROEasmentionedinprevious依據(jù)與(1994)(1g)sg TTT-sEPST附近三年的EPS平均值，成長(zhǎng)率之計(jì)算為： et0(lim h0h 0*egt 其中，t=1,2,T0得到連續(xù)復(fù)利概念下的成長(zhǎng)率g估計(jì)。ggb*tt (1g)EPS(1b*t其中，ROE是每股盈余除以每股股東權(quán)益賬面值， 率；b為預(yù)期保留的盈余比率。(1)1-b2公司 6-

TopicsStocksandtheStockSimplifyingtheDividendDiscountDividendDiscountModelwithValuationwithShare CashFlowValuationValuationMarketMarketAnomaliesandBehavioral

Copyright?2007byTheMcGraw-HillCompanies,Inc.AllShareFirmuseexcesscashtobuybackitsown →Morecashusestorepurchase→IncreaseownershipandearningsperTotalPayoutItvaluesallofthefirm’se ratherthanasinle6-

TopicsStocksandtheStockSimplifyingtheDividendDiscountGrowthStocks eValuationwithShare CashFlowValuationValuationMarketMarketAnomaliesandBehavioral

Copyright?2007byTheMcGraw-HillCompanies,Inc.AllTotalPayoutand CashFlowValuationModelsTheDiscounted CashFlowModel:Itbeginsbydeterminingthetotalvalueofthefirmtoallinvestors-bothequityanddebtholders.Webeginbyestimatingthefirm’senterpriseNote:withoutdeducinginterestandrepayingprincipalofValuingtheEnterprise:Toestimateafirm’senterprisevalue,wecomputethepresentvalueofthecashflow(FCF)thatthefirmhasavailabletopayallinvestors.=CashFlowfromoperatingactivities+CashFlowfrominvesting CashWeestimateafirm’scurrententerprisevaluebycomputingthepresentvalueofthe cashGiventheenterprisevalue,wecanestimatethestockpricebyTotalPayoutand CashFlowValuationModelsImplementingtheModel:Sincewearediscountingthecashflowthatwillbepaidtobothdebtandequityholders,weshouldusethefirm’sweightedaveragecostofcapital(WACC).Weforecastthefirm’s cashflowuptosomehorizon,togetherwithaterminal(continuation)valueoftheenterprise:Assumingaconstantlong-rungrowthratesothat

cash year isweightedaveragecostofcapital CashEx.ValuingKennethColeCashEx.Ex.ysisFig.AComparisonofDiscountedCashFlowModelsofStockValuationBycomputingthepresentvalueofthefirm’sdividends,totalpayoutsor flows,wecanestimatethevalueofthestock,thetotalvalueofthefirm’sequity,orthefirm’senterprisevalue.6-

TopicsStocksandtheStockSimplifyingtheDividendDiscountDividendDiscountModelwithValuationwithShare CashFlowValuationValuationMarketAnomaliesMarketAnomaliesandBehavioral Copyright?2007byTheMcGraw-HillCompanies,Inc.All6-

P/E(forfirmswithnon-negativeP/EBITDA(forfirms apital P/B(forfirms

substantialtangiblea Copyright?2007byTheMcGraw-HillCompanies,Inc.AllAnotherapplicationoftheLawofOnePriceisthemethodofcomparables.Inthemethodofcomparables(or“comps”),weesimatethevalueofthefirmbasedonthevalueofother,comparablefirmsorinvestmentsthatweexpectwillgeneratesimilarcashflowsintheValuation-ThePrice-EarningsRatio(P/Eratio):Eithertrailingearnings(earningsovertheprior12months)orforwardearnings(expectedearningsoverthecoming12months)isused.Ex.Ex.ValuationUsingthePrice-EarningsRatioEnterpriseValueMultiples:Becausethefirm’senterprisevaluerepresentsthetotalvalueofthefirm’sunderlyingbusinessratherthanjustthevalueofequity,usingtheenterpriseva advantageousifwewanttocomparefirmswithdifferentamountsofleverage.Becausetheenterprisevaluerepresentstheentirevalueofthefirmbeforeitpaysitsdebt,toformanappropriatemultiple,wedivideitbyameasureofearningsorcashflowsbeforeinterestpaymentsaremade.Commonmultiples:EnterpriseValuetoEBIT,EBITDAandCashFlow.MostpractitionersrelyonenterprisevaluetoEBITDAmultiple.ValueMultiple TableTableStockPricesandMultiplesfortheFootwearIndustry,January2006Fig.RangeofValuationsforKCPStockUsingAlternativeValuationMethodsValuationsfrommultiplesarebasedonthelow,high,andaveragevaluesofthecomparablefirmsfromprevioustable.Theconstantdividendgrowthmodelisbasedonan11%equitycostofcapitaland5%,8%,and10%dividendgrowthrates.The cashflowmodelisbasedontherangeofparametersinpreviousexample.(Midpointsarebasedonaveragemultiplesorbasecaseassumptions.Redandblueregionsshowthevariationbetweenthelowest-multiple/worst-casescenarioandthehighest-multiple/best-casescenario.KCP’sactualsharepriceof$26.75isindicatedbythegray 6-

TopicsStocksandtheStockSimplifyingtheDividendDiscountDividendDiscountModelwithValuationwithShare CashFlowValuationValuationMarketMarketAnomaliesandBehavioral Copyright?2007byTheMcGraw-HillCompanies,Inc.All6- Lunches Forecaststockpricesbasedonthewatchingthefluctuationsinhistoricalprices(thus“wiggle Copyright?2007byTheMcGraw-HillCompanies,Inc.All6-

ScatterPlotofNYSECompositeIndexreturnsovertwosuccessive Copyright?2007byTheMcGraw-HillCompanies,Inc.All6-

RandomWalkThemovementofstckpricesfromdaytodayDONOTreflectanypattern.stockpricesisrandom(skewedpositivestockpricesisrandom(skewedpositiveoverthe term. Copyright?2007byTheMcGraw-HillCompanies,Inc.All6-

RandomWalk Heads

(increase

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RandomWalkonceidentified

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ResearchthevalueofstocksusingNPVandothermeasurementsofcashflow Copyright?2007byTheMcGraw-HillCompanies,Inc.AllInformation,Competition,andStockPricesInformationinStockPrices:Whenabuyerseekstobuyastock,thewillingnessofotherpartiestosellthesamestocksuggeststhattheyvaluethestockdifferently.Thisinformationshouldleadbuyersandsellersrevisetheirvaluations.Ultima y,investorstradeuntiltheyreachaconsensusregardingthevalueofthestock.Inthisway,stockmarketsaggregatetheinformationandviewsofmanydifferentinvestors.TheEfficientMarketHypothesis:Competitionamonginvestorsworkstoeliminateallpositive-NPVtradingopportunities.Itimpliesthatsecuritieswillbefairlyprices,givenallinformationthatisavailabletoPublic,EasilyInterpretablePrivateorDifficult-to-Interpret

Ex.Ex.StockPriceReactionstoPublicInformationEx.Ex.UsingtheInformationinMarketPrices6-

WeakFormMarketpricesreflectallhistoricalSemi-StrongFormMarketpricesreflectallpubliclyavailable FormMarketpricesreflectallinformation,bothpublicandprivate

Copyright?2007byTheMcGraw-HillCompanies,Inc.AllEx.Ex.StockPriceReactionstoPrivateInformationFig