Outline of Session Outline of Session 4

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Stock Valuation Same DCF concept applies. To value a stock and get a stock price, you simply discount expected dividend and stock price next year at the rate of return appropriate for its risk class. For example: ABC stock will pay 10−Baht dividend next year. You expect the stock price to be 110 Baht next year. What should be the current stock price? P 0 = Div 1 + ( 1 + r ) ( 1 + r ) S P 1 10 + 110 = S Last Updated: June 11, 2009 © 2009 Charn Soranakom, Ph.D. Session 4 | Slide 12 of 19
P P 0 1 = = Div 1 ( 1 + r ) ( 1 + r ) Div S 2 + P 1 S ( 1 + r ) ( 1 + r ) S + P 2 S P P 0 0 1 ⎡ ⎢ Div ⎣ ⎛ Div 2 + P + ⎜ ⎝ + S 2 = = 1 ( 1 + r ) ⎜ ( 1 r ) Div S 1 2 ( 1 + r ) ( ) ( ) 2 S + Div 1 + r S 2 + P 2 1 + r S ⎞⎤ ⎟ ⎥ ⎠⎦ P 0 = Div 1 + + + ... 2 3 ( 1 + r ) ( ) ( ) ( ) ∞ S Div 1 + r S 2 Div 1 + r S 3 Div 1 + r S ∞ Last Updated: June 11, 2009 © 2009 Charn Soranakom, Ph.D. Session 4 | Slide 13 of 19
Page 1 and 2: Outline of Session 4 Three Basic Va
Page 3 and 4: Bonds Bonds are one type of fixed i
Page 5 and 6: Calculation of Bond Price Example:
Page 7 and 8: These curves are convex. Last Updat
Page 9 and 10: Interest Rate Risk (or Price Risk)
Page 11: Stocks and the Stock Market Stocks
Page 15 and 16: Where Does g Come From? Year 1 2 3
Page 17 and 18: Preferred stock is classified as e
Page 19: In−class Exercises Let’s do som

Outline of Session Outline of Session 4

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