chap018iseWord文件下载.docx

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k,pricewillfall.

b.（i）Anincreaseindividendpayoutwillreducethesustainablegrowthrateaslessfundsarereinvestedinthefirm.Thesustainablegrowthrate

（i.e.,ROE⨯plowback）willfallasplowbackratiofalls.

（ii）Theincreaseddividendpayoutratewillreducethegrowthrateofbookvalueforthesamereason--lessfundsarereinvestedinthefirm.

6.Sincebeta=1.0,thenk=marketreturn=15%

Therefore:

15%=D1/P0+g=4%+gg=11%

7.a.k=rf+β[E（rM）–rf]=6%+1.25（14%–6%）=16%

g=2/3⨯9%=6%

D1=E0（1+g）（1–b）=€6（1.06）（1/3）=€2.12

=€21.20

b.LeadingP0/E1=€21.20/€6.36=3.33

TrailingP0/E0=€21.20/€6.00=3.53

c.

−€18.55

ThelowP/EratiosandnegativePVGOareduetoapoorROE（9%）thatislessthanthemarketcapitalizationrate（16%）.

d.Now,yourevisebto1/3,gto1/3⨯9%=3%,andD1to:

E01.03⨯（2/3）=€4.12

Thus:

V0=€4.12/（0.16–0.03）=€31.69

V0increasesbecausethefirmpaysoutmoreearningsinsteadofreinvestingatapoorROE.Thisinformationisnotyetknowntotherestofthemarket.

8.a.

¥

16,000

b.Thedividendpayoutratiois¥

800/¥

1,200=2/3,sotheplowbackratiois

b=1/3.TheimpliedvalueofROEonfutureinvestmentsisfoundbysolving:

g=b⨯ROEwithg=5%andb=1/3ROE=15%

c.AssumingROE=k,priceisequalto:

12,000

Therefore,themarketispaying¥

4,000pershare（¥

16,000–¥

12,000）forgrowthopportunities.

9.Usingatwo-stagedividenddiscountmodel,thecurrentvalueofashareofSundanciiscalculatedasfollows.

where:

E0=$0.952

D0=$0.286

E1=E0（1.32）1=$0.9521.32=$1.2566

D1=E10.30=$1.25660.30=$0.3770

E2=E0（1.32）2=$0.952（1.32）2=$1.6588

D2=E20.30=$1.65880.30=$0.4976

E3=E0（1.32）21.13=$0.952（1.32）31.13=$1.8744

D3=E30.30=$1.87430.30=$0.5623

10.a.Freecashflowtoequity（FCFE）isdefinedasthecashflowremainingaftermeetingallfinancialobligations（includingdebtpayment）andaftercoveringcapitalexpenditureandworkingcapitalneeds.TheFCFEisameasureofhowmuchthefirmcanaffordtopayoutasdividends,butinagivenyearmaybemoreorlessthantheamountactuallypaidout.

Sundanci'

sFCFEfortheyear2000iscomputedasfollows:

FCFE=

Earningsaftertax+DepreciationexpenseCapitalexpendituresIncreaseinNWC

=$80million+$23million$38million$41million=$24million

FCFEpershare=FCFE/numberofsharesoutstanding

=$24million/84millionshares=$0.286

Atthegivendividendpayoutratio,Sundanci'

sFCFEpershareequalsdividendspershare.

b.

TheFCFEmodelrequiresforecastsofFCFEforthehighgrowthyears（2001and2002）plusaforecastforthefirstyearofstablegrowth（2003）inordertoallowforanestimateoftheterminalvaluein2002basedonperpetualgrowth.BecauseallofthecomponentsofFCFEareexpectedtogrowatthesamerate,thevaluescanbeobtainedbyprojectingtheFCFEatthecommonrate.（Alternatively,thecomponentsofFCFEcanbeprojectedandaggregatedforeachyear.）

ThefollowingtableshowstheprocessforestimatingSundanci'

scurrentvalueonapersharebasis.

FreeCashFlowtoEquity

BaseAssumptions

Sharesoutstanding:

84million

Requiredreturnonequity（r）:

14%

Actual

2000

Projected

2001

2002

2003

Growthrate（g）

27%

13%

Total

Pershare

Earningsaftertax

$80

$0.952

$1.2090

$1.5355

$1.7351

Plus:

Depreciationexpense

$23

$0.274

$0.3480

$0.4419

$0.4994

Less:

Capitalexpenditures

$38

$0.452

$0.5740

$0.7290

$0.8238

Increaseinnetworkingcapital

$41

$0.488

$0.6198

$0.7871

$0.8894

Equals:

FCFE

$24

$0.286

$0.3632

$0.4613

$0.5213

Terminalvalue

$52.1300*

Totalcashflowstoequity

$52.5913**

Discountedvalue

$0.3186***

$40.4673***

Currentvaluepershare

$40.7859****

*Projected2002Terminalvalue=（Projected2003FCFE）/（rg）

**Projected2002Totalcashflowstoequity=

Projected2002FCFE+Projected2002Terminalvalue

***Discountedvaluesobtainedusingr=14%

****Currentvaluepershare=

SumofDiscountedProjected2001and2002Totalcashflowstoequity

c.i.TheDDMusesastrictdefinitionofcashflowstoequity,i.e.theexpecteddividendsonthecommonstock.Infact,takentoitsextreme,theDDMcannotbeusedtoestimatethevalueofastockthatpaysnodividends.TheFCFEmodelexpandsthedefinitionofcashflowstoincludethebalanceofresidualcashflowsafterallfinancialobligationsandinvestmentneedshavebeenmet.ThustheFCFEmodelexplicitlyrecognizesthefirm’sinvestmentandfinancingpoliciesaswellasitsdividendpolicy.Ininstancesofachangeofcorporatecontrol,andthereforethepossibilityofchangingdividendpolicy,theFCFEmodelprovidesabetterestimateofvalue.TheDDMisbiasedtowardfindinglowP/Eratiostockswithhighdividendyieldstobeundervaluedandconversely,highP/Eratiostockswithlowdividendyieldstobeovervalued.Itisconsideredaconservativemodelinthatittendstoidentifyfewerundervaluedfirmsasmarketpricesriserelativetofundamentals.TheDDMdoesnotallowforthepotentialtaxdisadvantageofhighdividendsrelativetothecapitalgainsachievablefromretentionofearnings.

ii.Bothtwo-stagevaluationmodelsallowfortwodistinctphasesofgrowth,aninitialfiniteperiodwherethegrowthrateisabnormal,followedbyastablegrowthperiodthatisexpectedtolastindefinitely.Thesetwo-stagemodelssharethesamelimitationswithrespecttothegrowthassumptions.First,thereisthedifficultyofdefiningthedurationoftheextraordinarygrowthperiod.Forexample,alongerperiodofhighgrowthwillleadtoahighervaluation,andthereisthetemptationtoassumeanunrealisticallylongperiodofextraordinarygrowth.Second,theassumptionofasuddenshiftformhighgrowthtolower,stablegrowthisunrealistic.Thetransformationismorelikelytooccurgradually,overaperiodoftime.Giventhattheassumedtotalhorizondoesnotshift（i.e.,isinfinite）,thetimingoftheshiftformhightostablegrowthisacriticaldeterminantofthevaluationestimate.Third,becausethevalueisquitesensitivetothesteady-stategrowthassumption,over-orunder-estimatingthisratecanleadtolargeerrorsinvalue.Thetwomodelsshareotherlimitationsaswell,notablydifficultiesinaccuratelyforecastingrequiredratesofreturn,indealingwiththedistortionsthatresultfromsubstantialand/orvolatiledebtratios,andinaccuratelyvaluingassetsthatdonotgenerateanycashflows.

11.a.Theformulaforcalculatingapriceearningsratio（P/E）forastablegrowthfirmisthedividendpayoutratiodividedbythedifferencebetweentherequiredrateofreturnandthegrowthrateofdividends.IftheP/Eiscalculatedbasedontrailingearnings（year0）,thepayoutratioisincreasedbythegrowthrate.IftheP/Eiscalculatedbasedonnextyear’searnings（year1）,thenumeratoristhepayoutratio.

P/Eontrailingearnings:

P/E=[payoutratio（1+g）]/（rg）=[0.301.13]/（0.140.13）=33.9

P/Eonnextyear'

searnings:

P/E=payoutratio/（rg）=0.30/（0.140.13）=30.0

b.TheP/Eratioisadecreasingfunctionofriskiness;

asriskincreasestheP/Eratiodecreases.IncreasesintheriskinessofSundancistockwouldbeexpectedtolowertheP/Eratio.

TheP/Eratioisanincreasingfunctionofthegrowthrateofthefirm;

thehighertheexpectedgrowththehighertheP/Eratio.SundanciwouldcommandahigherP/Eifanalystsincreasetheexpectedgrowthrate.

TheP/Eratioisadecreasingfunctionofthemarketriskpremium.Anincreasedmarketriskpremiumwouldincreasetherequiredrateofreturn,loweringthepriceofastockrelativetoitsearnings.AhighermarketriskpremiumwouldbeexpectedtolowerSundanci'

sP/Eratio.

12.a.Thesustainablegrowthrateisequalto:

plowbackratio×

returnonequity=b×

ROE

where

b=[NetIncome–（Dividendpershare×

sharesoutstanding）]/NetIncome

ROE=NetIncome/Beginningofyearequity

In2000:

b=[208–（0.80×

100）]/208=0.6154

ROE=208/1380=0.1507

Sustainablegrowthrate=0.6154×

0.1507=9.3%

In2003:

b=[275–（0.80×

100）]/275=0.7091

ROE=275/1836=0.1498

Sustainablegrowthrate=0.7091×

0.1498=10.6%

b.i.Theincreasedretentionratioincreasedthesustainablegrowthrate.

Retentionratio=[NetIncome–（Dividendpershare×

Retentionratioincreasedfrom0.6154in2000to0.7091in2003.

Thisincreaseintheretention