The document provides financial information and calculations related to stocks, bonds, options, and portfolio management. It includes calculations of expected returns, costs of debt, dividend discount models, and weighted average cost of capital. The calculations are technical and involve variables like betas, yields, and cash flows.
The document provides financial information and calculations related to stocks, bonds, options, and portfolio management. It includes calculations of expected returns, costs of debt, dividend discount models, and weighted average cost of capital. The calculations are technical and involve variables like betas, yields, and cash flows.
The document provides financial information and calculations related to stocks, bonds, options, and portfolio management. It includes calculations of expected returns, costs of debt, dividend discount models, and weighted average cost of capital. The calculations are technical and involve variables like betas, yields, and cash flows.
The document provides financial information and calculations related to stocks, bonds, options, and portfolio management. It includes calculations of expected returns, costs of debt, dividend discount models, and weighted average cost of capital. The calculations are technical and involve variables like betas, yields, and cash flows.
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Po 88
ROE 12% Do 2.64 DPR 25% B/Retention Ratio (1 - 25%) = 75% g = b x ROE = 75% x 12% 9%
D1 = 2,64 x (1 + 9%) 2.8776
Po = D1 / (k - g)
k = (D1 / Po) + g 12.3% Beta Cov (Ri,Rm) = SDm^2
Correlation i,m x SDi x SDm
= SDm x SDm
Correlation i,m x SDi
= SDm
0,4 x 0,3 = 0.25
= 0.48 CAPM = 4% + 1,6 x (7% - 4%) = 8.80%
exp HPR = (28-25) / 25
= 12%
Expected Return > CAPM
So, plots above the SML
So in a CAPM world, all properly priced securities and portfolios of securities will plot on the SML, the SML, Po = D1 / (k - g) Debt to Equity 50% ke = (D1 / Po) + g = (0,5 x (1+5%) / 12,5) + 5% Debt 1 9.20% Equity 2 Total 3 WACC = (ke * we) + ((kd * (1 - t)) * wd) = (9,20% * 2/3) + ((6% * (1 - 30%)) x 1/3) 7.50% ke = 5% + 0,9 x 7% = 11.30% Debt 0.4 Equity 1 After tax cost of debt = 0,09 x (1 - 35%) Total 1.4 = 5.85%
Debt to Equity Ratio = 0.4
Debt = 0,4 / 1,4 = 28.57%
Equity = 1 / 1.4 = 71.43% 9.743% Corporate Bond Govt Bond N 2 2 PV -105.75 -104.95 FV 100 100 PMT 6 5 I/Y 2.995200% 2.434270%
0.560930% Semiannual Zero Coupon Bond N 10 PV 744.09 FV -1000 PMT 0 I/Y 3% t0 t1 92 (payoff = 0) r = 5% 60% 80 80 Exercise Price u = (92/80) 40% = 1.15 72 (payoff = 80 - 72) d = (72/80) = 0.9
Probability of up = 1+ r - d u-d = 0,15 / 0,25 = 0,6
Probability of down = 1 - 0,6
= 0,4
(0,6 x 0) + (0,4 x 8) = 1.05 = 3,04762 Price x (1 - Initial Margin) = (1 - Maintenance Margin)
70 x (1 - 50%) = (1 - 0,25)
= 46.66667 EV = mv of common and preferred stock + mv of debt - cash and short term investment = 12,8 + 5,3 + 1,9 - 1,4 18.6
EBITDA = EBIT + Depreciation Expense
= 1,2 + 0,12 1.32
EV/EBITDA = 14.09091 B = 1 - DPR = 1 - 0,4 = 0.6
g = B x ROE = 0,6 x 20% = 12%
D1 = 2 x 1,12 = 2.24
k = (D1 / Po) + g = (2,24 / 44) + 12% = 17.0910% g = ROE x B = 14% x (1 - 40%) = 8.40%
