Blue Ribband Motors Corp. Bon Voyage Marine, Inc. Nautilus Marine Engines Industry average Nautilus EPS w/o writeoff
$
$ $
Prospective Output area:
1) Total earnings Payout ratio Retention ratio Growth rate Total dividends next year Total equity value Value per share 2) Industry EPS Industry payout ratio Industry retention ratio Industry growth rate Year 1
= EPS* # outstandin shares = Devidends/Total earning = 1 Payout ratio g = ROE*b where b is retention ratio
1.41 = Sum of EPS of competitors/3 29.15% = DPS/EPS 70.85% 9.21%
$
732,808.40
2 3 4 5 6 Stock value in Year 5 Total stock value today Value per share 3) Industry PE Ragan PE (original assumption) Ragan PE (revised assumption) Stock price implied by industry PE 4) Total earnings Cash cow value Percentage not attributable to growth opportunities Percentage attributable to growth opportunities 5) ROE
6) Retaining more percentage of companies earnings and investing the money on new methods make the engines more efficient that will generate more profits.
... 2.1 Background of the Studies
Valuation is the first step toward intelligent investing. When an investor attempts to determine the worth of her shares based on the fundamentals, it helps her make informed decisions about what stocks to buy or sell. Without fundamental value, one is set adrift in a sea of random shortterm price movements and gut feelings.
Before we can value a share of stock, we have to have some notion of what a share of stock is. A share of stock is not some magical creation that ebbs and flows like the tide; rather, it is the concrete representation of partial ownership of a publicly traded company. If XYZ Corporation has 1 million shares of stock outstanding and we hold a single, solitary share, that means we own a millionth of the company.
There are some stockvaluation methods that we can use in valuing company’s stock. For instance: Discounted Cash Flow Model (DCFM), Dividend Discount Model (DDM) and Earnings Growth Model (EGM).DDM is the valuation method that we use in this paper.
2.2 Problem Statement and Objective
This research is mainly to value Public Bank Bhd stock through Dividend Discount Model (DDM).
2.3 Research Question
* What is the value of Public Bank Bhd stock?
* Is Public Bank Bhd stock a worth...
...STOCKVALUATION at RAGAN, Inc
Regan Thermal System Inc was founded 9 years ago by brother and sister Carrington and Genevieve Regan. The company manufactures and installs commercial heating, ventilation, and cooling (HVAC) units. Ragan has experienced rapid growth because of a propriety technology that increases the energy efficiency of its system. The company is equally owned by Carrington and Genevieve. The original agreement between the siblings gave each 50,000 shares of stock. In the event either wished to sell the stock, the shares first had to be offered to the other at a discounted price.
Although neither siblings wants to sell any shares at this time, they have decided they should value their holdings in the company for financial planning purposes. To accomplish this, they have gathered the following information about their main competitors.
EPS DPS STOCK PRICE ROE R
Arctic cooling Inc. $0.79 $0.20 $14.18 10% 10%
National Heating&Cooling 1.38 0.62 11.87 13 13
Expert HVAC Corp. 0.48 0.38 13.21 14 12
Industry average $0.56 $0.40 $13.09 12.33% 11.67%
Expert HVAC Corp.’s negative EPS were the result of an accounting writeoff last year. Without the writeoff, EPS of the company would have been $1.06
Last year Regan had an EPS of $4.54...
...LECTURE
STOCKVALUATION
1. Common stockvaluation
A share of common stock is more difficult to value in practice than a bond, for at least three reasons. First, with common stock, not even the promised cash flows are known in a advance. Second, the life of the investment is essentially forever, since common stock has no maturity. Third, there is no way to easily observe the rate of return that the market requires. Nonetheless, as we will see, there are cases in which we can come up with the present value of the future cash flows for a share of stock and thus determine its value.
Cash Flows
Imagine that you are considering buying a share of stock today. You plan to sell the stock in one year. You somehow know that the stock will be worth $70 at that time. You predict that the stock will also pay a $10 per share dividend at the end of the year. If you require a 25 percent return on your investment, what is the most you would pay for the stock? In other words, what is the present value of the $10 dividend along with the $70 ending value at 25 percent?
If you buy the stock today and sell it at the end of the year, you will have a total of $80 in cash. At 25 percent:
Present value = ($10 + 70)/1.25 = $64
Therefore, $64 is the value you would assign...
...How To Choose The Best StockValuation Method
When trying to figure out which valuation method to use to value a stock for the first time, most investors will quickly discover the overwhelming number of valuation techniques available to them today. There are the simple to use ones, such as the comparable method, and there are the more involved methods, such as the discounted cash flow model. Which one should you use? Unfortunately, there is no one method that is best suited for every situation. Each stock is different, and each industry sector has unique properties that may require varying valuation approaches. The good news is that this article will attempt to explain the general cases of when to use most of the valuation methods.
Two Categories of Valuation Model.
Valuation methods typically fall into two main categories: absolute and relative valuation models. Absolute valuation models attempt to find the intrinsic or "true" value of an investment based only on fundamentals. Looking at fundamentals simply mean you would only focus on such things as dividends, cash flow and growth rate for a single company, and not worry about any other companies. Valuation models that fall into this category include the dividend discount model, discounted cash flow model, residual income models and...
...
Intrinsic StockValuation  Emerson Electric
Intrinsic StockValuation  Emerson Electric
In this cyberproblem, you will value the stock for Emerson Electric, a scientific and technical instrument company. While stockvaluation is obviously important to investors, it is also vital to companies engaging in a merger or acquisition. Here, the process of stockvaluation can often be quite subjective. Frequently, the opposing sides of a merger or acquisition will have vastly different opinions of a firm's value.
For example, in 1994, part of AT&T's purchase of Mc Caw Cellular called for AT&T to acquire Mc Caw's 52 percent stake in LIN Broadcasting and purchase the remaining 48 percent at its fair value. LIN'S advisors valued the stock at $162 a share, while AT&T estimated its value at $100 a share. The difference resulted in a whopping $1.6 billion. As this example demonstrates, stockvaluation seems to be both art and science.
In this cyberproblem, use the dividend growth model's constant growth assumptions to value Emerson's stock. In addition, you will apply the concepts of risk and return by estimating the stock's required return from the CAPM model. In order to arrive at a value for Emerson Electric, you will gather and use information from Yahoo!Finance...
...Valuation of Common Stock
Ashok Banerjee
Common (Equity) Stocks
• Because common stock never matures, today’s
value is the present value of an infinite stream of
cash flows (i.e., dividend).
• But dividends are not fixed.
• Not knowing the amount of the dividends—or
even if there will be future dividends— makes it
difficult to determine the value of common stock.
• So what are we to do?
Valuation Models
• Dividend Valuation Model (DVM):
– Constant dividend: Let D be the constant
DPS:
The required rate of return (re) is the return shareholders
demand to compensate them for the time value of money tied
up in their investment and the uncertainty of the future cash
flows from these investments.
Valuation Models
• Dividend growth at a constant rate (g):
(also known as Gordon Model)
OR
OR
Exercise 1
• You buy a stock for Rs.230 and you
expect the next year’s dividend to be
Rs.12.42. Furthermore, you expect the
dividend to grow at a constant rate of 8%
p.a.
– What is the expected return of the stock?
– What is the dividend yield?
– What is the expected price of the stock in five
years?
Dividend and Earnings Growth
• Growth in dividends occurs primarily as a result
of growth in EPS.
• Growth in earnings, in turn, results from a
number of factors, including (1) inflation, (2)
retention ratio; and (3) ROE.
•...
...StockValuation project 
IVR Great Value 

Invesco mortgage a RealEstate investment trust company is a company that provides adjusted risk, to its customers primarily through dividend payout and secondly through capital appreciation. IVR isn’t the company seeking a favorable positive image in the community. Ivrs sole purpose is to generate profit and distribute it to the shareholder. As a mortgage specialist, Invesco has been well positioned to capitalize on the rebound in home values, rising mortgage volumes and lower delinquency rates. That has analysts looking for fullyear earnings of $2 a share this year. With a pricetoearnings (P/E) ratio of 8 times, below its peer average of 10, Invesco has value in addition to a serious yield of 13%.
Upon further analysis of IVR and the company’s financial statements one can view a hybrid financial culture that some conventional ratio analysis doesn’t lend itself too. For instance generally one major ratio that can identify a company’s current capability to meet all of its financial obligations is the acid ratio test. IVR has an Acid ratio test of 1.17.
A company’s profit before depreciation and amortization to current liabilities indicates the companies’ ability to satisfy its short term obligations, the higher the PDACL ratio the better. PDACL ratio can be calculated by taking the company’s profit before depreciation and amortization divided by the company’s current...
...Questions – StockValuation
1. How much should you pay for the preferred stock of the Dakota Doorknob Company if it has $100 par value, pays $8.50 a share in annual dividends, and your required rate of return is 10 percent?
2. NDV Corp.'s common stock is expected to pay a $2 dividend, which will grow at a compound rate of 4 percent indefinitely.
a. If the market requires a 14 percent return, what should be the current market price of the stock?
b. If the current market price of the stock is $40, what rate of return is the market requiring?
3. The stock of Macbeth Cleaning Corp. is currently selling for $25 a share. The company is expected to pay a dividend of $0.75 at the end of this year. If you bought Macbeth stock today and sold it for $29 after receiving the dividend, what rate of return would you earn?
4. Sooty Iron Works, Inc. has had declining sales and increasing expenses over the last decade and expects this trend to continue. As a result, the company predicts that earnings and dividends will decline indefinitely at a rate of 4 percent per year. Sooty's last dividend (D0) was $2 per share. If the market required rate of return is 12 percent, estimate the value of Sooty's common stock.
5. You are interested in purchasing the common stock of Azure Corporation. The firm paid...