Formula Plan in Securities Analysis and Port folio ManagementSuryadipta Dutta
Formula Plan in Securities Analysis and Port folio Management INCLUDING introduction,need, types, advantages with constant rupee value plan, constant ratio plan, Variable Ratio Plan, limitations and with every notes.
Formula Plan in Securities Analysis and Port folio ManagementSuryadipta Dutta
Formula Plan in Securities Analysis and Port folio Management INCLUDING introduction,need, types, advantages with constant rupee value plan, constant ratio plan, Variable Ratio Plan, limitations and with every notes.
Portfolio revision, securities, New securities, existing securities, purchases and sales of securities, maximizing the return, minimizing the risk, Transaction cost, Taxes, Statutory stipulations, Intrinsic difficulty, commission and brokerage, push up transaction costs, reducing the gains, constraint, Taxes, capital gains, long-term capital, lower rate, Frequent sales, short-term capital gains, investment companies, constraints, established, objectives, skill, resources and time, substantial adjustments, mispriced, excess returns, heterogeneous expectations, better estimates, generate excess returns, market efficiency, little incentive, predetermined rules, changes in the securities market, Performance measurement, Performance evaluation, superior or inferior, small investors, better performance, prompt liquidity, comparative performance, purchase and sale of securities.
Descriptions and explanation of all types of derivative instruments to trade with on the capital market.
http://www.koffeefinancial.com/Static/Learn.aspx
Portfolio revision, securities, New securities, existing securities, purchases and sales of securities, maximizing the return, minimizing the risk, Transaction cost, Taxes, Statutory stipulations, Intrinsic difficulty, commission and brokerage, push up transaction costs, reducing the gains, constraint, Taxes, capital gains, long-term capital, lower rate, Frequent sales, short-term capital gains, investment companies, constraints, established, objectives, skill, resources and time, substantial adjustments, mispriced, excess returns, heterogeneous expectations, better estimates, generate excess returns, market efficiency, little incentive, predetermined rules, changes in the securities market, Performance measurement, Performance evaluation, superior or inferior, small investors, better performance, prompt liquidity, comparative performance, purchase and sale of securities.
Descriptions and explanation of all types of derivative instruments to trade with on the capital market.
http://www.koffeefinancial.com/Static/Learn.aspx
1 Time Value of MoneyMilestone One Time Value of Money (please fi.docxhoney725342
1 Time Value of MoneyMilestone One: Time Value of Money (please fill in shaded YELLOW cells, row 6D - 6H) Explanations:Interest Rate8%FCF (Free Cash Flow) refers to the net change of cash generated from business operations within a specified reporting period, less capital expenditures, cash outlay tied up in working capital and dividends issued within the same accounting period. The FCF is one of the best indicator of a resilient entity with a good going concern. Note: For this part of the Milestone, please use page 43 -capital lease payments under property.
FCF1FCF2FCF3FCF4FCF5Amounts*113.1111.1108.2101.397.4Pv*(105)(95)(86)(74)(66)Total Pv*(427)*In millionsInterest Rate (given) - in our scenario we will use 8% interest rate. This rate is an implicit rate, the average rate that lease consumers face on the current market.Pv=FVN/(1+I)^NPV(I,N,0,FV)
2 Stock and Bond ValuationMilestone Two: Stock Valuation and Bond Issuance (please fill in the shaded YELLOW cells) Explanations:Cash Dividend - distribution of the corporate income. They are not expenses and do not appear on Income Statement.
Note: Part of Statement of Cash Flows. Please be aware that corporation list 5 years worth of dividends, but only 3 years worth of dividend yields (Hint: research F-1).
PART I: STOCK VALUATIONDividend from Financial Statements:YearCash Div/share ($)Dividend YieldStockholder's Equity (in millions)Stock Price(Dividend yield = Annual Dividend/Current Stock Price).
Note: Current Stock Price is not part of the Financial Statements - calculated using the formula for Dividend Yield20121.16017,700,000165714.28571428620131.56012,522,00015600000020141.8809,322,00094000001. Stock Valuation - Position of the company's dividend yield when the firm increases its dividend per share as follow(above) YearCash Div/Share ($) +1.75Dividend YieldStockholder's Equity (in millions)Stock PriceStockholder's Equity = Assets - Liabilities. Equity represents the ownership of a corporation. Owners are called stockholders because they hold stocks or shares of the company. The goal of every corporate manager is to generate shareholder value. 20122.91017,700,000165714.28571428620133.31012,522,00015600000020143.6309,322,00094000002. Dividend yield when the company decides to double the outstanding sharesReturn on Equity - for this part we will modify and use return on investment instead.
Using the formula: Dividend (+1.75)/+[(new price-old price)/old price]
Note - for this part, you will need extra price from 2011
YearCash Div/Share ($) Dividend YieldStockholder's Equity (in millions) -doubledStock Price20120.58035,400,000165714.28571428620130.78025,044,00015600000020140.94018,644,0009400000Bonds are a long-term debt for corporations. In buying a bond, the bond-owner lends money to the corporation. The borrower promises to pay specified interest rate during the loan's lifetime and at the maturity, payback the entire principle. In case of bankruptcy, bondholders have priority ...
09 Chapter modelChapter 9. Stocks and Their Valuation (Models)Thi.docxhoney725342
09 Chapter modelChapter 9. Stocks and Their Valuation (Models)This model is similar to the bond valuation models developed in Chapter 7 in that we employ discounted cash flow analysis to find the value of a firm's stock.THE DISCOUNTED DIVIDEND MODEL (Section 9-4)The value of any financial asset is equal to the present value of future cash flows provided by the asset. Stocks can be evaluated in two ways: (1) by finding the present value of the expected future dividends, or (2) by finding the present value of the firm's expected future free cash flows, subtracting the market value of the debt and preferred stock to find the total value of the common equity, and then dividing that total value by the number of shares outstanding to find the value per share. Both approaches are examined in this spreadsheet.When an investor buys a share of stock, he/she typically expects to receive cash in the form of dividends and then, eventually, to sell the stock and to receive cash from the sale. Moreover, the price any investor receives is dependent upon the dividends the next investor expects to earn, and so on for different generations of investors. The basic dividend valuation equation is:P0 =D1+D2+. . . .Dn( 1 + rs )( 1 + rs ) 2( 1 + rs ) nThe dividend stream theoretically extends on out forever, i.e., n = infinity. It would not be feasible to deal with an infinite stream of dividends, but if dividends are expected to grow at a constant rate, we can use the constant growth equation as developed in the text to find the value.CONSTANT GROWTH STOCKS (Section 9-5)In the constant growth model, we assume that the dividend will grow forever at a constant growth rate. This is a very strong assumption, but for stable, mature firms, it can be reasonable to assume that the firm will experience some ups and downs throughout its life but those ups and downs balance each other out and result in a long-term constant rate. In addition, we assume that the required return for the stock is a constant. With these assumptions, the price equation for a common stock simplifies to the following expression:P 0 =D 1( r s − g )The long-run growth rate (g) is especially difficult to measure, but one approximates this rate by multiplying the firm's return on equity by the fraction of earnings retained, ROE x
(1 – Payout ratio). Generally speaking, the long-run growth rate is likely to fall between 5% and 8%.EXAMPLEAllied Food Products just paid a dividend of $1.15, and the dividend is expected to grow at a constant rate of 8.3%. What stock price is consistent with these numbers, assuming a 13.7% required return?D0$2.15g8.3%rs13.7%P0 =D1=D0 (1+g)=$2.33( rs − g )( rs − g )0.054P0 =$43.12STOCK PRICE SENSITIVITYOne of the keys to understanding stock valuation is knowing how various factors affect the stock price. We construct below a series of data tables and a graph to show how the stock price is affected by changes in the dividend, the growth rate, and rs. R ...
The degree at which consumers change their purchasing behaviour is known as Elasticity. Homework Guru provides Elasticity and forecasting homework help to students across the world. For more visit www.homeworkguru.com or send us an email at support@homeworkguru.com
2. Rupee cost averaging
The simplest and most effective formula is rupee cost
averaging. First stocks with good fundamentals and
long term growth prospects should be selected. Such
stocks price tend to be volatile in the market and
provide maximum benefit from rupee cost averaging.
Secondly investor should make a regular commitment
of buying shares at regular intervals. Once he makes
commitment, he should purchase the shares
regardless of the stock’s price, the company’s short
term performance and the economic factors affecting
the stock market.
4. Constant rupee plan
This plan forces the investor to sell when the price
rises and purchase as the price falls.
5. Period Market
price
No. of
shares
Value of
stock
portfolio
Value of
defensive
portfolio
Total
1 50 200 10000 10000 20000
2 44 200 8800 10000 18800
3 40 200 8000 10000 18000
4 40 250 10000 8000 18000
5 44 250 11000 8000 19000
6 50 250 12500 8000 20500
7 50 200 10000 10500 20500
6. Constant ratio plan
Constant ratio plan attempts to maintain a constant
ratio between the aggressive and conservative
portfolios. The ratio is fixed by the investor.
7. Market
price
No. of shares in
stock portfolio
Value of
stock
Value of
defensive
portfolio
Total
portfolio
value
Ratio of stock
portion to
defensive
portion
50 100 5000 5000 10000 1.00
48 100 4800 5000 9800 .96
45 100 4500 5000 9500 .90
45 105.5 4748 4752 9500 1.00
40.5 105.5 4273 4752 9025 .90
40.5 111.4 4512 4511 9023 1.00
44.5 111.4 4957 4511 9468 1.10
44.5 106.4 4734 4734 9468 1.00
8. Variable ratio plan
According to this plan at varying levels of market
price, the proportion of the stocks and bond change.
Whenever the price of stock increases we decrease the
proportion of stocks and vice versa
9. Share price Value of
stock
proportion
Value of
defensive
Total
portfolio
value
Stock as a
percentage
of portfolio
Portfolio
adjustment
Shares in
stock
proportion
100 10000 10000 20000 50.00 100
90 9000 10000 19000 47.37 100
80 8000 10000 18000 44.4 100
80 12640 5400 18040 70.06 Bought 58
shares
158
90 14220 5400 19620 72.48 158
100 15800 5400 21200 74.53 Sold 52
shares
158
100 10600 10600 21200 50.00 106