Class Notes (977,595)
CA (576,053)
York (41,020)
ADMS (3,821)
ADMS 3531 (47)
all (27)
Lecture

lecture_3 notes.docx

3 Pages
90 Views
Fall 2011

Department
Administrative Studies
Course Code
ADMS 3531
Professor
all

This preview shows page 1. Sign up to view the full 3 pages of the document.
Personal Investment Management
ADMS 3531 - Fall 2011 – Professor Dale Domian
Lecture 3, Part 2 – Common Stock Valuation – Sept 27
Chapter Seven Outline
-Security analysis.
-The dividend discount model.
-The two-stage dividend growth model.
-The residual Income Model.
-Price ratio analysis.
Common Stock Valuation
-Our goal in this chapter is to examine the methods commonly used by financial analysts
to assess the economic value of common stocks.
-These methods are grouped into two categories:
oDividend discount models.
oPrice ratio models.
Security Analysis
-Fundamental analysis is a term for studying a companys accounting statements and other
financial and economic information to estimate the economic value of a company’s stock.
-The basic idea is to identify ‘undervalued stocks to buy and ‘overvalued stocks to sell.
In practice however, such stocks may in fact be correctly priced for reasons not
immediately apparent to the analyst.
The Dividend Discount Model
-The dividend discount model (DDM) is a method to estimate the value of a share of stock
by discounting all expected future dividend payments.
Estimating the Growth Rate
-The growth rate in dividends can be estimated in a number of ways.
oUsing the company’s historical average growth rate.
oUsing an industry median or average growth rate.
oUsing the sustainable growth rate.
The Sustainable Growth Rate
-Sustainable growth rate = ROE [x] Retention Ration

Loved by over 2.2 million students

Over 90% improved by at least one letter grade.

Leah — University of Toronto

OneClass has been such a huge help in my studies at UofT especially since I am a transfer student. OneClass is the study buddy I never had before and definitely gives me the extra push to get from a B to an A!

Leah — University of Toronto
Saarim — University of Michigan

Balancing social life With academics can be difficult, that is why I'm so glad that OneClass is out there where I can find the top notes for all of my classes. Now I can be the all-star student I want to be.

Saarim — University of Michigan
Jenna — University of Wisconsin

As a college student living on a college budget, I love how easy it is to earn gift cards just by submitting my notes.

Jenna — University of Wisconsin
Anne — University of California

OneClass has allowed me to catch up with my most difficult course! #lifesaver

Anne — University of California
Description
Personal Investment Management ADMS 3531 ­ Fall 2011 – Professor Dale Domian Lecture 3, Part 2 – Common Stock Valuation – Sept 27 Chapter Seven Outline ­ Security analysis. ­ The dividend discount model. ­ The two­stage dividend growth model. ­ The residual Income Model. ­ Price ratio analysis. Common Stock Valuation ­ Our goal in this chapter is to examine the methods commonly used by financial analysts  to assess the economic value of common stocks.  ­ These methods are grouped into two categories: o Dividend discount models.  o Price ratio models. Security Analysis ­ Fundamental analysis is a term for studying a company’s accounting statements and other  financial and economic information to estimate the economic value of a company’s stock.  ­ The basic idea is to identify ‘undervalued’ stocks to buy and ‘overvalued’ stocks to sell.  In practice however, such stocks may in fact be correctly priced for reasons not  immediately apparent to the analyst. The Dividend Discount Model ­ The dividend discount model (DDM) is a method to estimate the value of a share of stock  by discounting all expected future dividend payments. Estimating the Growth Rate ­ The growth rate in dividends can be estimated in a number of ways. o Using the company’s historical average growth rate. o Using an industry median or average growth rate. o Using the sustainable growth rate. The Sustainable Growth Rate ­ Sustainable growth rate = ROE [x] Retention Ration ­ Sustainable growth rate = ROE [x] (1 – Payout Ratio) ­ Return on Equity (ROE) = Net Income / Equity.  ­ Payout Ration = Proportion of earnings paid out as dividends. ­ Retention Ratio = Proportion of earnings retained for investment. The Two­Stage Dividend Growth Model ­ The two­stage dividend growth model assumes that a firm will initially grow at a rate 1   for T years, and thereafter grow at a rate2g  
More Less
Unlock Document

Only page 1 are available for preview. Some parts have been intentionally blurred.

Unlock Document
You're Reading a Preview

Unlock to view full version

Unlock Document

You've reached the limit of 4 previews this month

Create an account for unlimited previews.

Already have an account?

Log In


OR

Don't have an account?

Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Sign up

Join to view


OR

By registering, I agree to the Terms and Privacy Policies
Already have an account?
Just a few more details

So we can recommend you notes for your school.

Reset Password

Please enter below the email address you registered with and we will send you a link to reset your password.

Add your courses

Get notes from the top students in your class.


Submit