Valuation of Bonds and Shares

Valuation of Bonds ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Valuation of Bonds Contd… ,[object Object],[object Object],[object Object],[object Object]

Valuation of Bonds Contd… ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Valuation of Bonds Contd… ,[object Object],[object Object],[object Object]

Valuation of Bonds Contd… ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Valuation of Bonds Contd… ,[object Object],[object Object],[object Object],[object Object],[object Object]

Valuation of Preference Share ,[object Object],[object Object],[object Object],[object Object]

Valuation of Equity ,[object Object],[object Object],[object Object]

Dividend Discount Models A procedure for valuing the price of a stock by using predicted dividends and discounting them back to present value. The idea is that if the value obtained from the DDM is higher than what the shares are currently trading at, then the stock is undervalued. V 0 = Value of Stock D t = Dividend k = required return

No Growth Model ,[object Object],[object Object],[object Object],V D k o 

Constant Growth Model ,[object Object],[object Object],[object Object],[object Object]

Estimating Dividend Growth Rates ,[object Object],[object Object],[object Object],[object Object],g ROE b  

Multi-Period Dividend-Discount Model P N = expected sales price of stock at time N N = number of years the stock is to be held

Multi-Period Earnings-Discount Model P N = expected sales price of stock at time N N = number of years the stock is to be held

P/E Ratio and Growth Opportunities ,[object Object],[object Object],P D k g E b k b ROE P E b k b ROE 0 1 1 0 1 1 1           ( ) ( ) ( )

THANK YOU ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],END

Valuation of Bonds and Shares

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