GEN BUS 310 Lecture Notes - Lecture 5: Fisher Hypothesis, Net Present Value, Dividend Yield
Document Summary
Pv = fv/(1 + r)t & fv = pv(1 + r)t & r = (fv/pv)1/t 1 & t = ln(fv/pv)/ln(1+ r) T = n, r = i/y, pmt = dividend. Current yield = annual coupon / bond price. Fisher effect: (1 + r) = (1 + r)(1 + h), r is nominal, r is real, and h is inflation rate. Stock price with no dividend growth: p0 = d / r. Dgm: (dividend growth model) p0 = d0 (1+g) / (r-g) = d1 / (r-g) Clean price = dirty price accrued interest. Required return: r = (d1/p0) + g = dividend yield + capital gains yield. Ncf = (revenue cost dep. ) (1 t) + dep. Npv = pv(expected future ncfs) initial outlay. Aar = average net income / average book value. Profitability index = pv (expected future net cash flows) / initial outlay. 1 + (net present value / initial investment required)
