NET ASSET VALUE (NAV) INTEREST RATE

- Each share in the portfolio is valued at NAV.

- “per share metric” 𝑉−𝑀
𝐼+( 𝑛 )
𝑃𝑚 − 𝐿 𝑖 = 𝑥 100%
𝑉+𝑀
𝑁𝐴𝑉 = = ______ 𝑝𝑒𝑟 𝑠ℎ𝑎𝑟𝑒 2
𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑠ℎ𝑎𝑟𝑒𝑠
• i = Interest rate
• Pm = Market Value of the Portfolio
• I = Periodic Interest Payments
• L = Liability
• V = Par Value of Bonds
• M = Market Value of Bonds
• n = Term of Bonds
INFLATION RATE
- degree of movement of the CPI from a period
to another.
PRESENT VALUE OF THE BOND
𝐶𝑃𝐼=
𝐼𝑛𝑓𝑙𝑎𝑡𝑖𝑜𝑛 = :; ? − 1A 𝑥 100% = % 1 1
𝐶𝑃𝐼> 𝐵𝑜 = :∑VYZ= = Y
A + 𝑀 𝑥 : A
(1 + 𝑟[ ) 1 + 𝑟[ )V
• CPI1 = Current Price Index
• Bo = Present Value of the bond
• CPI0 = Base Price Index
• I = Annual interest paid in dollars
• n = Number of years to maturity
• M = Par Value in dollars
ANNUALIZED DISCOUNT RATE • rd = Required return
- indicates how much return, In % the investors
will get from a security.
ONE OR MULTIPLE PERIOD VALUATION MODEL
𝐵𝑣 − 𝐵𝑝 360
𝐴𝑛𝑛𝑢𝑎𝑙𝑖𝑧𝑒𝑑 𝐷𝑖𝑠𝑐𝑜𝑢𝑛𝑡 𝑅𝑎𝑡𝑒 = 𝑥
𝐵𝑝 𝐷 𝐶𝐹= 𝐶𝐹^
𝑃𝑜 = + +⋯
• Bv = Face Value or Market Value
(1 + 𝑟] )= (1 + 𝑟] )^
• Bp = Purchase Price
• Po = Value of stock today
• D = Tenor or period in days
• CFt = Expected Cash Flow (dividend or proceeds
from sale) per share at the end of year t
ANNUALIZED INVESTMENT RATE • rs = Required return on ordinary share
- portrays more accurate of how much investor
will earn from the security. It uses actual
number of days per year and the true initial DIVIDEND-BASED VALUATION MODEL
investment. - anticipating how much dividend will grow in the
future
𝐵𝑣 − 𝐵𝑝 365
𝐴𝑛𝑛𝑢𝑎𝑙𝑖𝑧𝑒𝑑 𝐼𝑛𝑣𝑒𝑠𝑡𝑚𝑒𝑛𝑡 𝑅𝑎𝑡𝑒 = 𝑥 𝐷= 𝐷^
𝐵𝑝 𝑀 𝑃𝑜 = + +⋯
(1 + 𝑟] )= (1 + 𝑟] )^
• Bv = Face Value or Market Value
• Bp = Purchase Price • Po = Value of stock today
• M = Number of days to maturity • CFt = Expected Cash Flow (dividend or proceeds
from sale) per share at the end of year t
• rs = Required return on ordinary share
MARKET SECURITY VALUE
- amount an investor is willing to pay in
exchange of a security.
ZERO GROWTH MODEL
- dividend will be fixed and not change anymore
𝑆𝑏 in the future
𝑀𝑎𝑟𝑘𝑒𝑡 𝑆𝑒𝑐𝑢𝑟𝑖𝑡𝑦 𝑉𝑎𝑙𝑢𝑒 =
(1 + 𝐼)V
𝐷1
• 𝑆ℎ𝑎𝑟𝑒 𝑉𝑎𝑙𝑢𝑒 =
Sb = Face Value of the security 𝑟𝑠
• I = Interest rate
• n = Number of periods • D1 = Expected Dividend per share at the end of
Year 1
*90 days term
• rs = Required return on ordinary share
= interest (%) x 90/360 = interest rate

INTEREST RATE

𝑖 = 𝑅𝑓 + 𝐷𝑚

• I = Interest
• Rf = risk free rate where:
𝑅𝑓𝑟 = 𝑅𝑓 − 𝐼𝑛𝑓𝑙𝑎𝑡𝑖𝑜𝑛
• Dm = Debt margin or debt spread or the risk
premium
CONSTANT GROWTH MODEL

𝐷1
𝑆ℎ𝑎𝑟𝑒 𝑉𝑎𝑙𝑢𝑒 =
(𝑟𝑠 − 𝑔)

• D1 = Expected Dividend per share at the end of

Year 1
• rs = Required return on ordinary share
• g = Expected Dividend Growth Rate

COMPOUNDED AVERAGE GROWTH (CAGR)

q
abcb[dV[, fghhdVY idhbj[
𝑆ℎ𝑎𝑟𝑒 𝑉𝑎𝑙𝑢𝑒 = (abcb[dV[, kbh]Y idhbj[ lcmbnmond)prsqt − 1

• n = number of years considered in the analysis

BOOK VALUE PER SHARE

𝐵𝑜𝑜𝑘 𝑣𝑎𝑙𝑢𝑒 𝑜𝑓 𝑎𝑠𝑠𝑒𝑡𝑠 − 𝐵𝑜𝑜𝑘 𝑉𝑎𝑙𝑢𝑒 𝑜𝑓 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠

−𝐵𝑜𝑜𝑘 𝑉𝑎𝑙𝑢𝑒 𝑜𝑓 𝑃𝑟𝑒𝑓𝑒𝑟𝑒𝑛𝑐𝑒 𝑆ℎ𝑎𝑟𝑒𝑠
u y
𝑇𝑜𝑡𝑎𝑙 𝑁𝑜. 𝑜𝑓 𝑂𝑢𝑡𝑠𝑡𝑎𝑛𝑑𝑖𝑛𝑔 𝑆ℎ𝑎𝑟𝑒𝑠