# Finance 6.1

Submitted By candyjo207
Words 1142
Pages 5
Stock Valuation Application

Constance Clark

BBA307

Stock Valuation Application 1. Write a brief overview concerning stock valuation. Your overview should include:

a. A brief explanation of the legal rights and privileges of common stockholders.
The common stockholders are the owners of a corporation and have certain rights and privileges. This means that ownership implies control. A firm’s common stockholders have the right to elect its firm’s directors, who in turn elect the officers who manage the business. Common stockholders often have the right, called the preemptive right, to purchase any additional shares sold by the firm. In some states, the preemptive right is automatically included in every corporate charter. In others, it is necessary to inset it specifically into the charter. b. Identification of a formula that applies to the valuation of all stocks.
The value of any stock is the present value of its expected dividend stream:

P0 _D1__ + __D2__ + __D3__ +* + __D∞__ = (1 + rs)t (1 + rs) (1 + rs)3 (1 + rs)∞ c. An explanation of what constitutes a “constant growth stock” and how it is valued.

From what my understanding of what a constant growth stock is, one whose dividends are expected to grow at a constant rate forever. Constant growth means that the best estimate of the future growth rate is some constant number, not that we really expect growth to be the same each and every year. Many companies have dividends which are expected to grow steadily into the foreseeable future, and such companies are valued as constant growth stocks.
A constant growth stock: D1 = D0(1 + g), D2 = D1(1 + g) = D0(1 + g)2, etc……

2. Complete the following stock value calculations:

A. Assume that XYZ is constant growth company whose last divined was \$2.00 with the dividend expected to...

### Similar Documents

Words: 39811 - Pages: 160

Free Essay

...Martial Arts Business Plan * Executive Summary * Company and Finance summary * Services Overview * Strategic Analysis * Marketing Executive Summary The purpose of this business plan is to raise \$50,000 for our MWMA Martial Arts studio while satisfying expected finances and operations over the next three years. MWMA Martial Arts is an Orem based LLC that will provide many levels of martial arts training specifically focused on Tae Kwon Do and Hapkido as well as the sale of martial arts supplies to customers in the surrounding area. The Company was founded by Jim W. is 1990. 1.1 Services The MWMA Martial Arts school will provide its student instruction from white belt through black belt instruction in Tae Kwon Do and / or Hapkido. The studio anticipates having 200 or more students enrolled by the end of the second year. The studio will provide instruction for individuals three years and older. Classes will be held Monday – Friday, the schedule is subject to change as the studio grows in size. The MWMA Martial Arts studio will offer an after school program focusing on charter schools. Some additional income will be generated by the martial arts studio merchandise and apparel. 1.2 Financing Mr. W is NOT seeking any financing other than his personal input of cash to run this studio. 1.3 Mission Statement The MWMA Martial Arts studio’s mission is to become recognized as a traditional school and the best......

Words: 596 - Pages: 3

Free Essay

#### Term Paper

...BANGLADESH FINANCE AND INVESTMENT COMPANY LIMITED Baitul Hossain Building (2nd Floor), 27, Dilkusha C/A, Dhaka‐1000 Balance Sheet As at 31 March 2011 Provisional & Un‐audited Note PROPERTY AND ASSETS Cash   Cash in hand   Balance with Bangladesh Bank Balance with other Banks and Financial Institutions   Inside Bangladesh   Outside Bangladesh Money at call and short notice Investment in Securities   Government    Others Lease, Loans and Advances   In Bangladesh   Outside Bangladesh Fixed Assets including Premises, Furniture and Fixtures Other Assets Non Banking Assets Total Assets LIABILITIES AND CAPITAL Liabilities   Financing (Borrowings) from other Banks financial Institutions and Agents Deposits and other Accounts Term Deposits Other Deposits Bills Payable Other Liabilities Total Liabilities Capital/ Shareholders' Equity Share Capital Statutory Reserve General Reserve Revaluation Surplus on Land & Building Retained earnings Total Shareholders' Equity Total Liabilities & Shareholders' Equity 3                          ‐       582,162,375       582,162,375 4    2,973,703,798                          ‐    2,973,703,798       199,507,329       637,734,997                          ‐    4,577,669,191       2,956,524,869                         ‐      2,956,524,869          200,670,584          116,267,219                         ‐      4,398,727,414                         ‐          489,369,077          489,369,077 31‐Mar‐11 Taka 31‐Dec‐10 Taka 1......

Words: 3998 - Pages: 16

Free Essay

#### Ratan Tata

... These are more specific, current and observable problems and derive from the source problem. They frequently are the problems immediately evident in the case. Do not write three sections: all problems should be listed under short or long term. (Three quarters of a page). (medical example: fever, loss of appetite, cough) Short Term: Current problems of recent origin, which can be solved within a period of months without major commitments of capital, technology, finance or managerial effort. (business example: overstocking, high prices, labour shortage) 2.1 2.2 2.3 Long Term: Problems which have existed for years, and which involve long-term trends in the internal or external environment. They will reuire solutions spread over a period longer than, say, a year, and may demand major allocations of capital, technology, finance and managerial effort. (business example: obsolete products, out-pf-date production process technology, lack of adequate plant capacity) 2.4 2.5 3. Analysis: Case facts which are crucial to the problems as defined are called “evidence”. They should not be mere repetition of case facts, but should rather reflect the processes of evaluation, synthesis, careful interpretation and insight. The analyst should...

Words: 966 - Pages: 4

#### Ratan Tata

...tonsillitis) 2. Secondary Problems: These are more specific, current and observable problems and derive from the source problem. They frequently are the problems immediately evident in the case. Do not write three sections: all problems should be listed under short or long term. (Three quarters of a page). (medical example: fever, loss of appetite, cough) Short Term: Current problems of recent origin, which can be solved within a period of months without major commitments of capital, technology, finance or managerial effort. (business example: overstocking, high prices, labour shortage) 2.1 2.2 2.3 Long Term: Problems which have existed for years, and which involve long-term trends in the internal or external environment. They will reuire solutions spread over a period longer than, say, a year, and may demand major allocations of capital, technology, finance and managerial effort. (business example: obsolete products, out-pf-date production process technology, lack of adequate plant capacity) 2.4 2.5 3. Analysis: Case facts which are crucial to the problems as defined are called “evidence”. They should not be mere repetition of case facts, but should rather reflect the processes of evaluation, synthesis, careful interpretation and insight. The analyst should “read between the lines”. This might involve the calculation of......

Words: 954 - Pages: 4

#### Bank

Words: 1210 - Pages: 5

Free Essay

#### Unified Accounts Code Structure

...Republic of the Philippines DEPARTMENT OF BUDGET AND MANAGEMENT COMMISSION ON AUDIT DEPARTMENT OF FINANCE UACS Unified Accounts Code Structure FAQs UACS Unified Accounts Code Structure FAQs TABLE OF CONTENTS 1. What is the Unified Accounts Code Structure? 3 2. Why a UACS? 3 3. Where will UACS be used? 3 4. Who will use the UACS? 4 5. How will UACS improve financial reporting? 4 6. What are the reporting requirements that will be best served by the UACS? 4 7. What document provides guidance on the use of the codes? 4 8. What policies and systems will be affected or need to be modified to implement UCAS? 4 9. What are the key elements of the UACS and how many codes are there for each element? 5 10. Do we really need the 54-digit code to implement UACS? 5 11. What are UACS users required to identify in facilitation data integrity of the Funding Source Code? -----------------------------------------------------------------------------------------------------------------------------------------5 12. What is the business rule to facilitate data integrity of the organization? 5 13. Under the UACS Location Code, are the codes the same codes that are being used now? 6 14. In preparing the budget for execution, can we use the current chart of accounts of COA on object coding? 6 15. What are the key business rules for code management to preserve transaction history and to ensure financial and performance data for one year is comparable with data from...

Words: 1523 - Pages: 7

#### The Impact of Foreign Share Ownership on Financial Performance in Australia

..................................................................... 8 Methodology....................................................................................................................... 8 4.1 4.2 Model Design .............................................................................................................. 9 Sample ....................................................................................................................... 10 5. 6. References ........................................................................................................................ 11 Appendix .......................................................................................................................... 14 6.1 6.2 Structure .................................................................................................................... 14 Variables.................................................................................................................... 15 2 1. Introduction Companies display differences in financial performance and understanding the drivers for such differences like firm specific factors have...

Words: 3941 - Pages: 16

#### Mfrd

Words: 6126 - Pages: 25

#### Vallaha Partners

...have been profitable in 2002 and the potential to have a revenue of a 50 million annual revenue in four years time. They have sold their solutions to big companies including IKON and Marriot and currently have working relationship with AT&T for which some of their past, current and future customer references are coming from. So far Telco has the first mover advantage offering a more complete solution package than any other competitors at the current time. Valhalla had completed the valuation of ROI on a 3.75 million investment to Telco resulting in a 6.8 to 12.1 times their capital investment with the company valuation of 170 to 343 million. A conservative valuation of Telco resulted in a 115 to 140 million company valuation and a 4.6 to 6.1 times return on capital. Telco needed a total investment of 10 million, and Valhalla along with Columbia capital would be investing 2.5 million each resulting in an ownership for Valhalla of 25%. Telco would then have to raise an additional 5 million in 2005. At which point, Valhalla would invest an additional 1.25 million, for a total investment of 3.75 million. Currently Telco is a profitable company booking 2 million in revenue for 2003 and forecasted by Valhalla to make more than 50 million in annual...

Words: 865 - Pages: 4

#### Account

...Structured Finance Homework 3 Bond Valuation with Annual Payments Exercise 5.1 5-1 Bond Valuation with Annual Payments Data: M = Par Value = \$1,000 C = Maturity value. We can assume that it is the same as the par Value = \$1,000 r = Coupon rate = 0.08 i = Effective interest rate per coupon = 0.09 n =Number of coupon payments remaining = 12 Calculations In order to calculate the current market price of these bonds, I will use the formula for the bond price on the date of a coupon payment. The bond price on the date of a coupon payment is the PV of all coupons + the PV of the maturity value *. means multiplication The present value of all coupons = M * r* [1-(1+i)-n]/i The present value of the maturity date = C * [(1+i)-n] The current market price of these bonds is M * r* [1-(1+i)-n]/i + C * (1+i)-n] = = 1,000 * 0.08 * [1-(1+0.09)-12]/0.09 + 1,000 * (1+0.09)-12] = = 80 *(1-0.355)/0.09 + 1,000 * 0.355 = \$572.858+ \$355.534 = \$928.3927 Answer: The current market price of these bonds is \$ 928.39 Exercise 5.2 5-2 YTM for Annual Payments Data: M = Par Value = \$1,000 Current Price (PV) = 850 r = Coupon Rate = 10% = 0.1 PMT = \$100, because (0.1 * 1,000) N =Years to maturity = 12 Calculations In order to calculate the Yield to Maturity (YTM), I will use the following formula: |850 = |[pic] ...

Words: 1049 - Pages: 5

#### Hermes Fund Case

...INTRODUCTION No business functions without finance. For there to be business concern therefore, there must be money. Development has however, changed the business operations in the capital globalize markets. People invest in business to make returns. It is therefore imperative for an individual to invest as well as institutional investors. Prior to development in capital markets, individual investors used to make their own investment decisions. But all these are changed now as individual investors have been replaced by institutional investors. This is also known as shareholding. Institutional investors play a very enviable role in corporate governance since the primary responsibility lies in side the board room, with the top management not with people and system imposed from outside. Looking at Board of Directors and investors, investors are seen as “sources of finance” or “partners in the enterprise”. This means that shareholders are seen as faceless, financial resource whose trust may be limited and need for checks and balances real? Or are they part of the business? Companies do take advice and guidance from their institutional shareholder in domestic and foreign business growth decisions (Stuffman 2008). This takes us to Hermes Fund Management, an institutional investment Corporation, which plays a strategic role in the activities of Total and Premier Oil. Total and Premier Oil has sought assistance from Hermes in managing business concern in Burma. This case study...

Words: 3059 - Pages: 13

#### Midland Case Analysis

...Midland Energy/Sample 2 Midland Energy Resources, Inc. Midland Energy Resources, Inc. is a global energy company that operates in oil and gas exploration and production (E&P), refining and marketing (R&M), and petrochemicals. Midland’s most profitable segment is its E&P division which produces 67% of the company’s net income (Exhibit 3). Its largest division is R&M with the Petrochemical division being the smallest. The primary goals of Midland’s financial strategy are to fund substantial overseas growth, invest in value-creating projects, achieve an optimal capital structure, and repurchase undervalued shares. To accomplish these goals, Midland must calculate an appropriate cost of capital that will allow reasonable valuations of their strategies. In funding overseas growth, Midland must use its cost of capital to analyze, evaluate, and convert foreign cash flows. In evaluating value-adding projects, the cost of capital must be used to discount project cash flows. To optimize its capital structure, the company must continuously evaluate its ideal borrowing based on its inherent cost. Lastly, when deciding when and how to repurchase shares, Midland’s management has to determine the intrinsic value of its shares. This requires determining the value of the company using DCF techniques and an appropriate discount rate. Cost of Capital Estimates of Midland’s cost of capital are used in analyses within the company and its three divisions. These analyses include asset appraisals...

Words: 2133 - Pages: 9

#### Midland Case

...Midland Energy/Sample 2 Midland Energy Resources, Inc. Midland Energy Resources, Inc. is a global energy company that operates in oil and gas exploration and production (E&P), refining and marketing (R&M), and petrochemicals. Midland’s most profitable segment is its E&P division which produces 67% of the company’s net income (Exhibit 3). Its largest division is R&M with the Petrochemical division being the smallest. The primary goals of Midland’s financial strategy are to fund substantial overseas growth, invest in value-creating projects, achieve an optimal capital structure, and repurchase undervalued shares. To accomplish these goals, Midland must calculate an appropriate cost of capital that will allow reasonable valuations of their strategies. In funding overseas growth, Midland must use its cost of capital to analyze, evaluate, and convert foreign cash flows. In evaluating value-adding projects, the cost of capital must be used to discount project cash flows. To optimize its capital structure, the company must continuously evaluate its ideal borrowing based on its inherent cost. Lastly, when deciding when and how to repurchase shares, Midland’s management has to determine the intrinsic value of its shares. This requires determining the value of the company using DCF techniques and an appropriate discount rate. Cost of Capital Estimates of Midland’s cost of capital are used in analyses within the company and its three divisions. These analyses include...

Words: 2133 - Pages: 9