Professional Documents
Culture Documents
Chapter 6 & 7
Presented by
Group V
INEZ, IRENE,
WINARDI, RENDY
SUAREZ MANUFACTURING
1
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SUAREZ MANUFACTURING
Undertaking Investment
Dividend in 2010 $ 2.15
Required Return 16 %
GROWTH
Best Case Worst Case
2010 To ∞ 13 % 2010 To 2012 13 %
2013 To ∞ 10 %
SUAREZ MANUFACTURING
P0 = D1
(r – g*)
= $ 2.09
(0.14 – 0.10)
2
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SUAREZ MANUFACTURING
D2004 1 D$1.30
= = PVIFg, 4 = 0.684
D2009 (1 + g)4 D$1.90
n 1% 2% 3% 4% 5% 6% 7% 8% 9% 10%
1 .990 .980 .971 .962 .952 .943 .935 .926 .917 .909
2 .980 .961 .943 .925 .907 .890 .873 .857 .842 .826
3 .971 .942 .915 .889 .864 .840 .816 .794 .772 .751
4 .961 .924 .888 .855 .823 .792 .763 .735 .708 .683
SUAREZ MANUFACTURING
D1 $2.15
P0 = = =
(r – g) (0.16 – 0.13)
Investment results an increase on the value of firm’s stock,
because there’s an increase in return of dividend.
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SUAREZ MANUFACTURING
STOCK VALUE
DIVIDEND
SUAREZ MANUFACTURING
Undertaking Investment
Dividen 2010 $ 2,15
Required Return 16 %
Growth
Best Case Worst Case
2010 To ∞ 13 % 2010 To 2012 13 %
2013 To ∞ 10 %
4
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SUAREZ MANUFACTURING
D2013 $3.03
P2013 = = =
(r – g) (0.16 – 0.10)
SUAREZ MANUFACTURING
5
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SUAREZ MANUFACTURING
STOCK VALUE
DIVIDEND
ENCORE INTERNATIONAL
6
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ENCORE INTERNATIONAL
ENCORE INTERNATIONAL
Assume b=1.10
Required Return & Risk Premium…?
Data Points
rj = RF+ [b(rm - RF)]
b r
0,00 6,00 % RF
0,25 8,00 % RISK PREMIUM
0,50 10,00 %
0,75 12,00 %
rj = 6%+[1.1(14% - 6%)]
1,00 14,00 % rm
1,25 16,00 %
1,50 18,00 % = 6% +
1,75 20,00 %
2,00 22,00 % =
7
16/02/2011
ENCORE INTERNATIONAL
Assume b=1.25
Required Return & Risk Premium…?
Data Points
rj = RF+ [b(rm - RF)]
b r
0,00 6,00 % RF
0,25 8,00 % RISK PREMIUM
0,50 10,00 %
0,75 12,00 %
rj = 6%+[1.25(14% - 6%)]
1,00 14,00 %
1,25 16,00 % rm = 6% +
1,50 18,00 %
1,75 20,00 % =
2,00 22,00 %
ENCORE INTERNATIONAL
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ENCORE MANUFACTURING
D0
P0 =
(r – g)
$4
=
(0.16 – 0)
ENCORE MANUFACTURING
D0(1+g)
P0 =
(r – g)
$4(1 + 0.06)
=
(0.16 – 0.06)
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ENCORE MANUFACTURING
D0 $4.95
P0 = = =
(r – g) (0.16 – 0.06)
ENCORE MANUFACTURING
g = 8% g = 8% g = 6%
PV (D2010)
PV (D2011)
PV (p2010)
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ENCORE MANUFACTURING
11