1 / 16

Temp force company

Temp force company. Fundamental analysis case. The group. 1- Mazen Al- Kharji : 430105989 2- Ahmad Al- Kanaan : 430104146 3- Ahmad Al- Turaif : 429103531 4- Mohammed Abu Al- Naja : 430103444. A/ Describe briefly the legal rights and privileges of common stockholders?. Usually:

octavia-gillespie
Download Presentation

Temp force company

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Temp force company Fundamental analysis case

  2. The group 1- Mazen Al-Kharji: 430105989 2- Ahmad Al-Kanaan: 430104146 3- Ahmad Al-Turaif: 429103531 4- Mohammed Abu Al-Naja: 430103444

  3. A/ Describe briefly the legal rights and privileges of common stockholders? Usually: 1-they usually have the right to sell their shares. 2-they usually have the right to vote. 3-they have the right to inspect corporate books and records. 4-they have the right to receive dividends and it's a limited right.

  4. B/ 1-write out a formula that can be used to value any stock, regarding it's dividend pattern? • P= D1/(1+K)+ D2/(1+K)2+ D3/(1+K)3+..+Dn/(1+K)n

  5. 2-what is a constant growth stock? How are constant growth stocks valued? • A constant growth stock is a stock whose dividends are expected to grow at a constant rate in the foreseeable future • P= D0 (1+g)/k-g

  6. 3-what happens if a company has a constant g that exceeds its rs? will many stocks have expected g > rs in the short run (i.e., for the next few years)? In the long run (i.e., forever)? • Assume k > g. if g > k, it will give a negative stock price. • There are some cases where g experience supernormal growth which gives g > k and it cannot be forever. in the above equation, it assumes that g is constant and remain indefinitely, so , g cannot be more than k in the long run.

  7. C/ Assume that Temp Force has a beta coefficient of 1.2,that the risk-free rate (the yield on T-bonds) is 7.0%,and that the market risk premium is 5%.What is the required rate of return on the firms stock? • The formula to solve the question: k= RFR+ (Rm-RFR) β = 7% + (5%-7%) 1.2 =4.6%

  8. D/ Assume that Temp Force is a constant growth company whose last dividend (D0,which was paid yesterday) was 2.00$ and whose dividend is expected to grow indefinitely at a 6% rate. 1-what is the firms expected dividend stream over the next 3 years? The formula to solve the question: Dn=Dn-1(1+g) D0= 2.00 $ , g = 6% D1= 2 (1+0.06) = 2.12$ Year 1 D2= 2.12 (1+0.06) = 2.2472$ Year 2 D3= 2.247 (1+0.06) = 2.38182$ Year 3

  9. 2-what is the firms current intrinsic stock price? The formula to solve the question: P= D1/(k-g) P= 2.12/(0.13-0.06) = 30.2857$ 3-what is the stock expected value 1 year from now? We will use the same formula in the last question: P= D1/(k-g) P= 2.2472/(0.13-0.06) = 32.10285714$

  10. 4-what are the expected dividend yield, the expected capital gain yield, and the expected total return during the first year? Expected Dividend yield=D1/pt-1 = 2.12/30.28 = 7% Capital gain yield= pt-pt-1/pt-1 = 32.10-30.28/30.28=6% Expected total return= 7%+6%=13%

  11. E/ now assume that the stock is currently selling at $30.29, what is it's expected rate of return? To calculate the required rate of return we will apply this formula: P=D1/(k-g) Then, K=(D1/p)+g = (2.12/30.29)+6% = 13%

  12. F/ what would the stock price be if the dividends were expected to have zerogrowth? • We will consider "g" as 0 in the formula as following , the formula to solve the question: P= D0(1+0)/(k-0) P= 2*1/0.13-0 = 15.38$

  13. g/ Now assume that Temp Forces dividend is expected to experience supernormal growth of 30% from year 0 to year 1, 20% from year 1 to year 2, and 10% from year 2 to year 3. After year 3, dividends will grow at a constant rate of 6%. What is the stocks intrinsic value under these conditions? What are the expected dividend yield and capital gains yield during the first year ? What are the expected dividend yield and capital gains yield during the fourth year ( from Year 3 to Year 4 )?

  14. 1-To solve this question we need to divide it to two parts first, the super-normal growth period. then, the constant growth period as following: g1=30% , g2=20% , g3=10% , gconstant=6%, D= 2 $ , K= 13% for the first three years we will use this formula: P=D(1+g)/(1+k) Year 1= 2(1+0.3)/(1+0.13)= 2.301 $ Year 2= 2.301(1+0.2)/(1+0.13)= 2.4435 $ Year 3= 2.4435(1+0.1)/(1+0.13)= 2.3786 $ after the third year the growth will be constant at 6% so the formula will be: P=D0(1+g)/(k-g) Year 4= 2.3786(1+0.06)/(0.13-0.06)= 36.0188 $ so the sock value will be: P=2.301+2.4435+2.3786+36.0188= 43.1419 $

  15. First Year 2-To calculate the Dividend yield for year1 we have to use the following formula: DY=D1/P0 DY=2(1+0.30)/ 43.1419 = 0.060266= 6.0266 % To calculate the Capital Gain Yield for year 1 we can choose one of two ways: 1- CGY= Pt-Pt-1/Pt-1 Or, 2-CGY= Expected Total Return - Dividend Yield To simplify the calculation we will use the second one because we calculated the Expected Total Return in Question E part 4 as following: CGY= 0.13 – 0.060266 = 0.069734 = 6.9734%

  16. Year 4 3-To calculate the Dividend yield for year 4 we have to use the following formula: DY=D4/P0 DY= 2.3786 / 43.1419 = 0.05513 = 5.513% To calculate the Capital Gain Yield for year 4 we can choose one of two ways: 1- CGY= Pt-Pt-1/Pt-1 Or, 2-CGY= Expected Total Return - Dividend Yield To simplify the calculation we will use the second one because we calculated the Expected Total Return in Question E part 4 as following: CGY= 0.13 – 0.05513 = 0.07487 = 7.487%

More Related