1 / 5

Suarez Manufacturing Impact of a proposed risky in investment on stock value

Suarez Manufacturing Impact of a proposed risky in investment on stock value. Vu Huong Giang - MA0N0211. Case. Early 2010, CFO had to assess the impact of a proposed risky investment on the firm’s stock value Annual dividends in 5 years (2005-2009): 2009 $1.90

tamra
Download Presentation

Suarez Manufacturing Impact of a proposed risky in investment on stock value

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. Suarez ManufacturingImpact of a proposed risky in investment on stock value Vu HuongGiang - MA0N0211

  2. Case • Early 2010, CFO had to assess the impact of a proposed risky investment on the firm’s stock value • Annual dividends in 5 years (2005-2009): • 2009 $1.90 • 2008 1.70 • 2007 1.55 • 2006 1.40 • 2005 1.30

  3. Case • Expected dividend by the end of 2010 = $2.09 • Required return = 14% • Historical annual rate of growth will continue in the future => constant rate => Current value per share = ?

  4. Case • Calculating g – constant rate of growth: D2005/D2009 = 1/(1+g)4 = PIVFg,4 • PIVFg,4 ~ 0.683 • g = 10% • current value P0 = D2010/(rs – g) = 2.09/ (0.14 – 0.10) = $52.25

  5. Present Value Interest Factors for $1 discounted at i percent

More Related