Professional Documents
Culture Documents
Chapter 9
Stock Valuation
© McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.
Chapter Outline
9.1 The Present Value of Common Stocks
9.2 Estimates of Parameters in the Dividend Discount
Model
9.3 Comparables
9.4 Valuing Stocks Using Free Cash Flows
9.5 The Stock Markets
D1 D2 D3
D1 D2 D3
P0
1 R 1 R 1 R
2 3
D
P0
R
D1 D0 1 g
D2 D1 1 g D0 1 g
2
D3 D2 1 g D0 1 g
3
.50 1.02
P0 $3.92
.15 .02
D1 D0 1 g1
D1 1 g1 D0 1 g1
2
D2
DN 1 1 g1 D0 1 g1
N
DN
DN 1 DN 1 g 2 D0 1 g1 1 g 2
N
T
1 R
DT 1
C 1
1 g
T
R g 2
P 1
R g1 1 R T 1 R
T
2 1.08 3 1.04
$2 1.08 1.08 .12 .04
3
P 1 3
.12 .08 1.12 1.123
$32.75
P $54 1 .8966
1.123
P $5.58 23.31
P $28.89
D0 1 g D1
P0
Rg Rg
D0 1 g D1
R g g
P0 P0
Operations.
Floor activity.
Limit orders:
You specify ticker, quantity, and price.
The order will be executed only if trade can be made at the limit
price or better.
• Limit buy can only be executed at limit price or lower.
• Limit sell can only be executed at limit price or higher.