清华大学公司金融(金融硕士课程)CF5

CorporateFinanceHaoWangTsinghuaUniversityFall2013HaoWang(TsinghuaUniversity)StockValuationFall20131/32KeyconceptsandskillsUnderstandhowstockpricesdependonfuturedividendsanddividendgrowthBeabletocomputestockpricesusingthedividendgrowthmodelUnderstandhowgrowthopportunitiesa¤ectstockvaluesUnderstandthePEratioUnderstandhowstockmarketsworkHaoWang(TsinghuaUniversity)StockValuationFall20132/32ChapteroutlineThePresentValueofCommonStocksEstimatesofParametersintheDividendDiscountModelGrowthOpportunitiesPrice-EarningsRatioTheStockMarketsHaoWang(TsinghuaUniversity)StockValuationFall20133/32DividendGrowthModel(DGM)HaoWang(TsinghuaUniversity)StockValuationFall20134/32StockvaluationWhatiscommonstock?Ownershipinthe…rm.Receivecash‡ows:Dividends.Or,ifthecompanyshutsdown,thevalueoftheassetsafterallofthedebthasbeenpaido¤.Assumethat:Acompanypaysdividendseachperiod(usuallyquarterly)withcertainty.thecompanywillNEVERgobankrupt.HaoWang(TsinghuaUniversity)StockValuationFall20135/32ThePVofcommonstockThevalueofanyassetisthepresentvalueofitsexpectedfuturecash‡ows.Stockownershipproducescash‡owsfrom:DividendsCapitalGain:apro…tmadefrombuyinganassetandresellingitatahigherpriceValuationofDi¤erentTypesofStocksZeroGrowthConstantGrowthDi¤erentialGrowthHaoWang(TsinghuaUniversity)StockValuationFall20136/32Case1:zerogrowthAssumethatdividendswillremainatthesamelevelforeverDiv1=Div2=Div3=...Sincefuturecash‡owsareconstant,thevalueofazerogrowthstockisthepresentvalueofaperpetuity:P0=Div1(1+R)1+Div2(1+R)2+Div3(1+R)3+...=DivRHaoWang(TsinghuaUniversity)StockValuationFall20137/32ExampleBackStreetGuys,Co.commonstockcurrentlypaysa$2dividend,whichisexpectedtoremainconstantforever.Iftherequiredreturnonthisstockis5%,whatpriceshouldthestocksellfortoday?Howabouttomorrow?Thedayaftertomorrow,etc?HaoWang(TsinghuaUniversity)StockValuationFall20138/32Case2:constantgrowthAssumethatdividendswillgrowataconstantrate,g,forever,i.e.,Div1=Div0
(1+g)Div2=Div1
(1+g)=Div0
(1+g)2Div3=Div2
(1+g)=Div0
(1+g)3...Sincefuturecash‡owsgrowataconstantrateforever,thevalueofaconstantgrowthstockisthepresentvalueofagrowingperpetuity:P0=Div1RgThisiscalled“GordonGrowthModel”.HaoWang(TsinghuaUniversity)StockValuationFall20139/32ExampleSupposeBigD,Inc.,justpaidadividendof$.50.Itisexpectedtoincreaseitsdividendby2%peryear.Ifthemarketrequiresareturnof15%onassetsofthisrisklevel,howmuchshouldthestockbesellingfor?P0=0.50(1+0.02)0.150.02=$3.92HaoWang(TsinghuaUniversity)StockValuationFall201310/32StockpricesensitivitytorateofreturnHaoWang(TsinghuaUniversity)StockValuationFall201311/32StockpricesensitivitytogrowthrateHaoWang(TsinghuaUniversity)StockValuationFall201312/32Case3:di¤erentialgrowthAssumethatdividendswillgrowatdi¤erentratesintheforeseeablefutureandthenwillgrowataconstantratethereafter.TovalueaDi¤erentialGrowthStock,weneedto:1Estimatefuturedividendsintheforeseeablefuture.2EstimatethefuturestockpricewhenthestockbecomesaConstantGrowthStock(case2).3Computethetotalpresentvalueoftheestimatedfuturedividendsandfuturestockpriceattheappropriatediscountrate.HaoWang(TsinghuaUniversity)StockValuationFall201313/32Case3:di¤erentialgrowthAssumethatdividendswillgrowatrateg1forNyearsandgrowatrateg2thereafter.Div1=Div0
(1+g1)Div2=Div1
(1+g1)=Div0
(1+g1)2...DivN=DivN1
(1+g1)=Div0
(1+g1)NDivN+1=DivN
(1+g2)=Div0
(1+g1)N
(1+g2)...HaoWang(TsinghuaUniversity)StockValuationFall201314/32Illustration:di¤erentialgrowthAssumethatdividendswillgrowatrateg1forNyearsandgrowatrateg2thereafterHaoWang(TsinghuaUniversity)StockValuationFall201315/32Case3:di¤erentialgrowthWecanvaluethisasthesumof:P0=PA+PBaT-yearannuitygrowingatrateg1PA=Div1Rg11(1+g1)T(1+R)T#plusthediscountedvalueofaperpetuitygrowingatrateg2thatstartsinyearT+1PB=DivT+1Rg2(1+R)THaoWang(TsinghuaUniversity)StockValuationFall201316/32ExampleAcommonstockjustpaidadividendof$2.Thedividendisexpectedtogrowat8%for3years,thenitwillgrowat4%inperpetuity.Whatisthestockworth?Thediscountrateis12%.HaoWang(TsinghuaUniversity)StockValuationFall201317/32Withcash‡owsHaoWang(TsinghuaUniversity)StockValuationFall201318/32SolutionP0=$21.080.120.081(1.08)3(1.12)3#+$2(1.08)3(1.04)0.120.04(1.12)3=$54[10.8966]+$32.75(1.12)3=$5.58+$23.31=$28.89HaoWang(TsinghuaUniversity)StockValuationFall201319/32EstimateofgrowthrategThevalueofa…rmdependsuponitsgrowthrate,g,anditsdiscountrate,R.Wheredoesgcomefrom?g=retentionratioreturnonretainedearningswhereretentionratioisretainedearnings/netincomeexpectedreturnonretainedearningsisassumedthesameashistoricalreturnonequity,ROE(netincome/totalbookequity).HaoWang(TsinghuaUniversity)StockValuationFall201320/32WheredoesRcomefrom?Thediscountratecanbebrokenintotwoparts.ThedividendyieldThegrowthrate(individends)Inpractice,thereisagreatdealofestimationerrorinvolvedinestimatingR.HaoWang(TsinghuaUniversity)StockValuationFall201321/32UsingtheDGMto…ndRStartwiththeDGM:P0=Div0(1+g)Rg=Div1RgRe-arrangeandsolveforR:R=Div0(1+g)P0+g=Div1P0+g=Dividendyield+DividendgrowthHaoWang(TsinghuaUniversity)StockValuationFall201322/32GrowthOpportunitiesModel(NPVGO)HaoWang