FIN 301 Class Web Page, Fall ' 15
Instructor: Maggie Foley
Jacksonville University
The Syllabus (session
3 as an example)
Business Finance Online, an interactive learning tool for the Corporate Finance Student https://www.zenwealth.com/BusinessFinanceOnline/index.htm
Weekly SCHEDULE, LINKS, FILES and Questions
Week 
Coverage, HW, Supplements 
Required 
WSJ Papers
Reference only

Videos (optional) 

Chapter
1, 2 
Chapter 1:
Introduction Flow of funds describes the financial assets flowing from
various sectors through financial intermediaries for the purpose of buying
physical or financial assets. *** Household, nonfinancial business, and our government Financial institutions facilitate exchanges of funds and
financial products. *** Building blocks of a financial system. Passing and
transforming funds and risks during transactions. *** Buy and sell, receive and deliver, and create and underwrite
financial products. *** The transferring of funds and risk is thus created. Capital
utilization for individual and for the whole economy is thus enhanced. Chapter 2 Introduction of
Financial Market Introduction to Capital
Markets  ION Open Courseware (Video)
How the stock market works (video) 
Boom! What Next for
This YoYo of a Stock Market? (FYI only, for interested students)

Introduction
to Capital Markets  ION Open Courseware


Chapter
5 
Chapter 5 Time value of
Money Time value of money
(Video) The time value of money 
German Nande (video)
Chapter 5 in
Class Exercise Part II Solution Homework
(Due on 9/18) Chapter 5 supplement II–Introduction of
Trading
(give it a try and it is fun)
Stock
screening tools FINVIZ.com http://finviz.com/screener.ashx
Zack
Recommendation of stocks (Daily) http://www.zacks.com/stocks/zacksrank Summary
of stock screening rules from class discussion PEG<1 PE<15 (? FB’s
PE>100?) First
Mid Term on 9/22 covering chapter 1, 2, and 5 
Math Equations FV = PV *(1+r)^n PV = FV / ((1+r)^n) N = ln(FV/PV)
/ ln(1+r) Rate = (FV/PV)^{1/n} 1 Annuity: N = ln(FV/C*r+1)/(ln(1+r)) Or N = ln(1/(1(PV/C)*r)))/
(ln(1+r)) EAR = (1+APR/m)^m1 APR = (1+EAR)^(1/m)*m Excel Formulas To get FV, use FV function. =abs(fv(rate, nper, pmt, pv)) To get PV, use PV
function
= abs(pv(rate, nper,
pmt, fv)) To get r, use rate
function = rate(nper, pmt, pv,
fv) To get number of years, use nper function
= nper(rate, pmt, pv, fv) To get
annuity payment, use PMT function
= pmt(rate, nper, pv, fv) To get
Effective rate (EAR), use Effect function = effect(nominal_rate,
npery) To get
annual percentage rate (APR), use nominal function = nominal(effective ratge, npery) 
Financial Analysis Using
Excel, Part 1 (Time Value of Money)


Chapter 3 
Chapter 3 Financial Statement
Analysis Experts Explain: Financial Statements (well
explained, video) ******* Part I: Balance Sheet and Income Statement
************** Home Depot
(Ticker in the market: HD) reported the following information for the year
ended January 30^{th}, 2011 (expressed in millions). Sales: $67,977 Cost of goods
sold: $44,693 Marketing,
general and administrative expenses: $15,885 Depreciation
expenses: $1,616 Interest
expense: $530 Tax rate:
36.70% Number of
shares outstanding: 1,623 Dividends paid
to stockholders: $1,569. Use the above
information to try to prepare the income statement of
Home Depot for the year ended January 30^{th}, 2011 Home Depot
(Ticker in the market: HD) reported the following information for the year
ended January 30^{th}, 2011 (expressed in millions). Cash: $545 Accounts
receivables: $1,085 Inventories:
$10625 Other current
assets: $1,224 Gross fixed
assets: $38,471 Accumulated
depreciation: $13,411 Other fixed
assets: $1,586 Accounts
payable: $9,080 Short term
notes payable: $1,042 Long term debt:
$11,114 Total common
stock: $3,894 Retained
earnings: $14,995 Use the above
information to try to prepare the balance sheet of
Home Depot for the year ended January 30^{th}, 2011. 
Cash flow template (new and simple, my contribution) 

*********
Part II: Cash Flow Statement ******************

In Millions of USD (except for per share
items) 
52 weeks ending
20140202 
Net Income/Starting Line 
5,385.00 
Depreciation/Depletion 
1,757.00 
Amortization 
 
Deferred Taxes 
31 
NonCash Items 
228 
Changes in Working Capital 
289 
Cash from Operating Activities 
7,628.00 
Capital Expenditures 
1,389.00 
Other Investing Cash Flow Items, Total 
118 
Cash from Investing Activities 
1,507.00 
Financing Cash Flow Items 
37 
Total Cash Dividends Paid 
2,243.00 
Issuance (Retirement) of Stock, Net 
8,305.00 
Issuance (Retirement) of Debt, Net 
3,933.00 
Cash from Financing Activities 
6,652.00 
Foreign Exchange Effects 
34 
Net Change in Cash 
565 
Cash Interest Paid, Supplemental 
639 
Cash Taxes Paid, Supplemental 
2,839.00 
Discussion:
1. What are the three components of
cash flow statement?
2. What does net change in cash mean?
Now let’s learn how to calculate cash changes in each session
Source of cash
Use of Cash
Cash Flow from Operations: Five Steps
1. Add back depreciation.
2. Subtract (add) any increase (decrease) in
accounts receivable.
3. Subtract (add) any increase (decrease) in
inventory.
4. Subtract (add) any increase (decrease) in
other current assets.
5. Add (subtract) any increase (decrease) in
accounts payable and other accrued expenses
HW of chapter 3
1. For the above precision tool example, work out the cash flow statement
2.
Firm AAA just showed how it operated in the prior
year.
Sales = $2,000; Cost of Goods Sold =
$1,000; Depreciation Expense = $200; Administrative Expenses = $180; Interest
Expense = $30; Marketing Expenses = $50; and Taxes = $200. Prepare income statement
3.
A firm has $2000 in
current assets, $3000 in fixed assets, $300 in accounts receivables, $300
accounts payable, and $800 in cash. What is the amount of the inventory?
(hint: 900)
4. A firm has net working capital of $1000. Longterm debt
is $5000, total assets are $8000, and fixed assets are $5000. What is the
amount of the total equity? (Hint: to find total equity, you need to
calculate total debt, which is a sum of long term debt and short term debt.
Short term can be found from new working capital.) (hint: 1000)
5. Andre's Bakery has sales of $100,000 with costs of
$50,000. Interest expense is $20,000 and depreciation is $10,000. The tax rate
is 35 percent. What is the amount of tax paid? (hint: 7000)(hint: tax =
taxable income * tax rate and taxable income = EBT)
6. Andre's Bakery has sales of $100,000 with costs of $50,000. Interest expense is $20,000 and depreciation is $10,000. The tax rate is 35 percent. The company also paid $3,000 for dividend. What is the retained earning? (hint: retained earning = net income  dividend)(hint: 10,000)
7. The Blue Bonnet's 2008
balance sheet showed net fixed assets of $2.2 million, and the 2009 balance
sheet showed net fixed assets of $2.6 million. The company's income statement
showed a depreciation expense of $1,000,000. What was the amount of the net
capital spending for 2009? （$1,400,000）
8. A firm has $500 in inventory, $1,860 in fixed assets, $190 in
accounts receivables, $210 in accounts payable, and $70 in cash. What is the
amount of the current assets? (760)
9. A firm has net working capital of $640. Total liability is
$5,860. Total assets are $6,230, and fixed assets are $3,910. What is the amount
of long term debt? (4180)
10. The Purple Martin
has annual sales of $687,400, total debt of $210,000, total equity of
$365,000, and a profit margin of 5.00 percent. What is the return on
assets? (5.98 percent)
11. A firm generated net income of $878. The depreciation
expense was $40 and dividends were paid in the amount of $25. Accounts
payables decreased by $13, accounts receivables increased by $20, inventory
decreased by $14, and net fixed assets decreased by $8. There was no interest
expense. What was the net cash flow from operating activity? (899)
12. Your firm has net income of $198 on total sales of $1,200. Costs
are $715 and depreciation is $145. The tax rate is 34%. The firm does not
have interest expenses. What is the operating cash flow? (383)
13. Teddy’s Pillows has beginning net fixed assets of $480 and
ending net fixed assets of $530. Assets valued at $300 were sold during the
year. Depreciation was $40. What is the amount of capital spending? (90)
14. The total assets are $900,
the fixed assets are $600, longterm debt is $500, and shortterm debt is
$200. What is the amount of net working capital? (100)
15. At the beginning of the year, a firm has current assets of $380
and current liabilities of $210. At the end of the year, the current assets
are $410 and the current liabilities are $250. What is the change in net
working capital?
16. Art’s Boutique has sales of $640,000 and costs of $480,000.
Interest expense is $40,000 and depreciation is $60,000. The tax rate is 34%.
What is the net income? (39,600)
Use the above information to prepare cash flow statement.
More in class exercises:
1. What was change in cash
flow in investment for 2009? (Hint: compare for net fixed asset and
adjust for depreciation).
A. $80
B. $1,680
C. $1,840
D. $1,700
2. What is the net
change in cash flow in operation in 2009? (hint: start with NI, depreciation
and adjust for other current assets and liability)
A. 3,822
B. 2,798
C. 3,575
D. 3,269
3. What is the net change in
cash flow in financing in 2009? (Hint: calculate cash flow changes in debt
and equity and then add them up – calculate dividend first)
A. $3,008
B. $1,720
C. $2,175
D. $1,668
4. Inventory has increased
from $18,776 to $21,908. This is ____________ of cash;
Long term debt has increased from $9,800
to $11,500. This is ____________ of cash.
A. use; use
B. use; source
C. source; source
D. source; use
5. Which one of the following
is a source of cash?
A. increase in accounts receivable
B. decrease in notes payable
C. decrease in common stock
D. increase in accounts payable
E. increase in inventory
6. one of the following is a use of cash?
A. increase in notes payable
B. decrease in inventory
C. increase in longterm debt
D. decrease in accounts receivables
E. decrease in common stock
7. Which
one of the following is a source of cash?
A. repurchase of common stock
B. acquisition of debt
C. purchase of inventory
D. payment to a supplier
E. granting credit to a customer
8. Which one of the following is a source of
cash?
A. increase in accounts receivable
B. decrease in common stock
C. decrease in longterm debt
D. decrease in accounts payable
E. decrease in inventory
9. During the year, Kitchen Supply increased its
accounts receivable by $130, decreased its inventory by $75, and decreased
its accounts payable by $40. How did these three accounts affect the firm's
cash flows for the year?
10. A firm generated net income of $878. The
depreciation expense was $47 and dividends were paid in the amount of $25.
Accounts payables decreased by $13, accounts receivables increased by $22,
inventory decreased by $14, and net fixed assets decreased by $8. There was
no interest expense. What was the net cash flow from operating activity? What
was the net cash flow from investment?
Chapter
4
Chapter
4: Ratio Analysis
Chapter
4 how to master analyzing financial statement (FYI only)
Stock
screening tools
FINVIZ.com
http://finviz.com/screener.ashx
We will focus on several ratios:
P/E (price per share/earning
per share)
P/B (market price per share / book value
per share)
PEG (PE ratio / growth rate. PEG<1,
undervalued stock)
EPS (earning per share)
EPS growth (EPS growth rate)
ROA (Return on Asset = NI/TA)
ROE (return on equity = NI/TE)
Current ratio (liquidity measure. = CA/CL)
Quick ratio (liquidity measure. =
(CAInventory)/CL)
Debt/Equity (Leverage measure. = TD/TE)
Gross margin (profit measure. =
EBITDA/sales, or = Gross margin/sales)
Operating margin (profit measure. =
EBIT/sales, or = operating income/sales)
Net profit margin (profit measure. =
NI/sales)
Payout ratio (= dividend / NI, measures
distribution to shareholders).
HW:
Calculate
all ratios above of WalMart except PEG, EPS growth
rate, using the most recent financial statement of WMT (due on 10/13).
Second Mid Term on 10/15, covering chapter 3
and 4.
Dress
Code: Business Casual
Address:
800 Walter Street
(904) 6321000
Chapter
6
Chapter 6 Risk and Return
Chapter 6 In Class Exercise (word
file here)
Chapter 6 In class
exercise class demonstration (Excel): prices of Stock 1, 2, and 3 are
randomly generated using randbetween (bottom, top)
in Excel. In class, we did WMT, YAHOO,
and GOOG.
HW of chapter 6
Chapter 6 Homework (Due on
11/10/2015, updated)
1) The prices
for the Electric Circuit Corporation for the first quarter of 2009 are given
below. The price of the stock on
Month
End Price
January $125.00
February 138.50
March 132.75
2) Stock prices of company A are as follows: 15, 20, 21, 26, 24 (from Sept, 2015 to May 2015)
Stock prices of company B are as follows: 34, 28, 25, 22, 26 (from Sept, 2015 to May 2015)
Calculate four stock returns (Should have four returns) of both companies.
Calculate four stock risk (standard deviation)
Calculate correlation
Calculate portfolio returns assuming 50% invested in company A and 50% invested in company B.
3)
Collectibles Corp. has a beta of 2.5 and a standard deviation of returns of
20%. The return on the market portfolio is 15% and the risk free rate is 4%.
What is the risk premium on the market? (11%)
4) An investor
currently holds the following portfolio:
Amount
Invested
8,000 shares of Stock A $16,000 Beta = 1.3
15,000 shares of Stock B $48,000 Beta = 1.8
25,000 shares of Stock C $96,000 Beta = 2.2
The beta for
the portfolio is? (1.99)
5) Assume that
you have $165,000 invested in a stock that is returning 11.50%, $85,000
invested in a stock that is returning 22.75%, and $235,000 invested in a
stock that is returning 10.25%. What is the expected return of your
portfolio? (12.87%)
6) If you hold
a portfolio made up of the following stocks:
Investment
Value Beta
Stock A $8,000 1.5
Stock B $10,000 1.0
Stock C $2,000 .5
What is the
beta of the portfolio? (1.2)
7. The riskfree rate of return is 3.9 percent and
the market risk premium (r_{m} –r_{f}) is 6.2 percent. What is the expected rate
of return on a stock with a beta of 1.21?
( 11.4%)
8.You own a portfolio consisting of the stocks below.
Stock Percentage of portfolio Beta
1.
20% 1
2.
30% 0.5
3.
50% 1.6
The
risk free rate is 3% and market return is 10%.
a.
Calculate the
portfolio beta. (1.15)
b.
Calculate the
expected return of your portfolio.(11.05%)
9.Computing holding
period return for Jazman and Solomon for period 1
through 3 (bought in period 1 and sold in period 3). Show the holding period
returns for each company. (50%, 25%)
Period Jazman Solomon
1 $10 $20
2 $12 $25
3 $15 $15
10. An investor currently holds the following
portfolio:
Amount
Invested
8,000 shares of Stock A $10,000 Beta = 1.5
15,000 shares of Stock B $20,000 Beta = 0.8
25,000 shares of Stock C $20,000 Beta = 1.2
Calculate the
beta for the portfolio. (1.1)
11. Joe purchased 800 shares of Robotics Stock
at $5 per share on 1/1/13. Bill sold the shares on 4/18/13 for $6. Robotics
stock has a beta of 1.2, the riskfree rate of return is 1%, and the market
risk premium is 10%. Joe's holding period return is how much? (20%)
Excel Command:
sumproduct(array1, array2)
stdevp(observation1, obv2, obv3,….)
correl(stock 1’s return, stock 2’s return)
beta
= slope(stock return, sp500 return)
Chapter
7
Chapter 7 Bond Market
Website:
FINRA.org (www.findra.org, è Investor center è market data è bond è corporate bond)
WALMART STORES INC
Coupon Rate 3.300% Maturity
Date 04/22/2024
Symbol 
CUSIP 
Next Call Date 01/22/2024 
Callable Yes 
Last Trade Price $106.18 
Last Trade Yield 2.512% 
Last Trade Date 04/09/2015 
US Treasury Yield — 
Credit and Rating Elements
Moody's
Rating 
Aa2 (04/21/2014) 

Standard
& Poor's Rating 
AA (04/16/2014) 

Fitch
Rating 
AA (09/30/2014) 

Coupon
Payment Frequency 
SemiAnnual 

1.
2. Understand what is coupon, coupon rate,
yield, yield to maturity, market price, par value, maturity, annual bond,
semiannual bond, current yield.
2.
3. Understand how to price bond
Bond
price = abs(pv(yield, maturity, coupon, 1000)) – annual coupon
Bond
price = abs(pv(yield/2, maturity*2, coupon/2,
1000)) – semiannual coupon
Also
change the yield and observe the price changes. Summarize the price change
pattern and draw a graph to demonstrate your findings.
Again,
when yield to maturity of this semi_annual
coupon bond is 3%, how should this WMT bond sell for?
3.
Understand how to calculate bond returns
Yield
to maturity = rate(maturity, coupon,
market price, 1000) – annual coupon
Yield
to maturity = rate(maturity*2, coupon/2,
market price, 1000)*2 – semiannual coupon
For
example, when the annual coupon bond is selling for $1,200, what is its
return to investors?
For
example, when the semiannual coupon bond is selling for $1,200, what
is its return to investors?
4.
Current yield: For the above bond,
calculate current yield.
5.
Zero coupon bond: coupon=0 and treat it as
semiannual coupon bond.
Example:
A ten year zero coupon bond is selling for $400. How
much is its yield to maturity?
A ten year zero coupon bond’s yield to maturity is 10%. How much is its price?
6.
Understand what is bond
rating and how to read those ratings.
a.
Who are Moody, S&P and Fitch?
b.
What is WMT’s
rating?
Homework
1. IBM 5 year
2% annual coupon bond is selling for $950. How much this IBM
bond’s YTM? 3.09%
2. IBM
10 year 4% semi_annual coupon bond
is selling for $950. How much is this IBM bond’s YTM? 4.63%
3. IBM
10 year 5% annual coupon bond offers 8% of return. How much
is the price of this bond? 798.7
4. IBM
5 year 5% semiannual coupon bond offers 8% of return. How
much is the price of this bond? $878.34
5. IBM
20 year zero coupon bond offers 8% return. How much is the price of this
bond?
6. Collingwood
Homes has a bond issue outstanding that pays an 8.5 percent coupon and
matures in 18.5 years. The bonds have a par value of $1,000 and a market
price of $964.20. Interest is paid semiannually. What is the yield to
maturity? (8.90%)
7. Grand
Adventure Properties offers a 9.5 percent coupon bond with annual payments.
The yield to maturity is 11.2 percent and the maturity date is 11 years from
today. What is the market price of this bond if the face value is $1,000?($895.43)
8. The
zero coupon bonds of D&L Movers have a market price of $319.24, a face
value of $1,000, and a yield to maturity of 9.17 percent. How many years is
it until these bonds mature? (12.73 years)
9. A
zero coupon bond with a face value of $1,000 is issued with an initial price
of $212.56. The bond matures in 25 years. What is the implicit interest, in
dollars, for the first year of the bond's life? (6.29%)
10. The bonds
issued by Stainless Tubs bear a 6 percent coupon, payable semiannually.
The bonds mature in 11 years and have a $1,000 face value. Currently, the
bonds sell for $989. What is the yield to maturity? (6.14%)
Summary of bond pricing excel functions
To calculate bond price (annual coupon bond):
Price=abs(pv(yield to maturity, years
left to maturity, coupon rate*1000, 1000)
To calculate yield to maturity (annual coupon bond)::
Yield to maturity = rate(years left to maturity, coupon rate
*1000, price, 1000)
To calculate bond price (semiannual coupon bond):
Price=abs(pv(yield to maturity/2,
years left to maturity*2, coupon rate*1000/2, 1000)
To calculate yield to maturity (semiannual coupon bond):
Yield to maturity = rate(years left to maturity*2, coupon
rate *1000/2, price, 1000)*2
To calculate number of years
left(annual coupon bond)
Number of years =nper(yield to
maturity, coupon rate*1000, price,
1000)
To calculate number of years
left(semiannual coupon bond)
Number of years =nper(yield to
maturity/2, coupon rate*1000/2,
price, 1000)/2
To calculate coupon (annual coupon
bond)
Coupon = pmt(yield to maturity, number of years left, price,
1000)
Coupon rate = coupon / 1000
To calculate number of years
left(semiannual coupon bond)
Number of years = pmt(yield to maturity/2, number of years left*2,
price, 1000)
Coupon rate = coupon / 1000
Chapter
10
Chapter
10 Capital Budgeting
NPV, IRR, and Payback period
template in Excel
Chapter 10 In Class Exercise
Question 1: Project with an initial cash outlay of
$20,000 with following free cash flows for 5 years.
Year Cash flows
1 $8,000
2 4,000
3 3,000
4 5,000
5 10,000
1) How much is the payback
period (approach one)?
· Does
this method consider time value of money?
· Easy
to explain to outsiders?
2) If the firm has a 10%
required rate of return. How much is NPV (approach 2)?
· What
does NPV means? NPV>0 indicates what? Otherwise?
· Does
this method consider time value of money?
· Easy
to explain to outsiders?
3) If the firm has a 10%
required rate of return. How much is IRR (approach 3)?
· What
does IRR mean? IRR > 10% indicates what? Otherwise?
· Does
this method consider time value of money?
· Easy
to explain to outsiders?
4) If the firm has a 10%
required rate of return. How much is PI (approach 4)?
· What
does PI mean? PI > 1 indicates what? Otherwise?
· Does
this method consider time value of money?
· Easy
to explain to outsiders?
Question 2: Project with an initial cash outlay of $60,000
with following free cash flows for 5 years.
Year FCF
Initial
outlay –60,000
1 –25,000
2 –24,000
3 13,000
4 12,000
5 11,000
The firm has a 15% required rate of return.
Calculate payback period, NPV, IRR and PI.
Analyze your results.
Question 3: Mutually Exclusive Projects
1) Consider the following
cash flows for oneyear Project A and B, with required rates of return of 10%.
You have limited capital and can invest in one but one project. Which one?
§ Initial Outlay: A = $200; B = $1,500
§ Inflow: A
= $300; B = $1,900
2) Example: Consider two
projects, A and B, with initial outlay of $1,000, cost of capital of 10%, and
following cash flows in years 1, 2, and 3:
A:
$100 $200 $2,000
B:
$650 $650 $650
Which project should you choose if they are mutually
exclusive? Independent? Crossover rate?
Homework (answers will be provided soon, due
on 12/5/2015)
1. Consider the following two projects,
calculate the NPVs of the two projects. If the two projects are mutually exclusive,
which one should you choose? What about they are independent projects? (Answer:
NPV of A= 8.67; NPV of B = 12.65. Choose A, if mutually exclusive;
Choose A if independent)
Project 
Year 0 Cash Flow 
Year 1 Cash Flow 
Year 2 Cash Flow 
Year 3 Cash Flow 
Year 4 Cash Flow 
Discount Rate 
A 
100 
40 
40 
40 
N/A 
.15 
B 
73 
30 
30 
30 
30 
.15 
2. You are
considering an investment with the following cash flows. If the required rate
of return for this investment is 15.5 percent, should you accept the
investment based solely on the internal rate of return rule? Why or why not? (Answer: NPV=96078, >0, Accept)
3. It will
cost $6,000 to acquire an ice cream cart. Cart sales are expected to be
$3,600 a year for three years. After the three years, the cart is expected to
be worthless as the expected life of the refrigeration unit is only three
years. What is the payback period? (Answer:
1.67 years)
4. An
investment project provides cash flows of $1,190 per year for 10 years. If
the initial cost is $8,000, what is the payback period? (Answer: 6.72 years)
5. A firm evaluates all of its projects by using the NPV decision
rule. At a required return of 14 percent, the NPV for the following project
is _____ and the firm should _____ the project.
6. Consider
the following two mutually exclusive projects:
What is the NPV of each project? What is the IRR of each project?
What is the crossover rate for these two projects?
7. Cash Flow in
Period
Initial
Outlay 1 2 3 4
$4,000,000 $1,546,170 $1,546,170 $1,546,170 $1,546,170
The Internal Rate of Return (to nearest whole percent) i?
8. Welltran Corp. can purchase a new machine for
$1,875,000 that will provide an annual net cash flow of $650,000 per year for
five years. The machine will be sold for $120,000 after taxes at the end of
year five. What is the net present value of the machine if the required rate
of return is 13.5%.
9. Compute
the discounted payback period for a project with the following cash flows
received uniformly within each year and with a required return of 8%:
Initial Outlay = $100
Cash Flows: Year 1 = $40
Year
2 = $50
Year
3 = $60
10. A project
requires an initial investment of $389,600. The project generates free cash
flow of $540,000 at the end of year 4. What is the internal rate of return
for the project?
NPV Excel syntax
Syntax
NPV(rate,value1,value2, ...)
Rate is the rate of
discount over the length of one period.
Value1, value2,
...
are 1 to 29 arguments representing the payments and income.
· Value1, value2, ... must
be equally spaced in time and occur at the end of
each period. NPV uses the order of value1, value2, ... to interpret the order of cash flows. Be
sure to enter your payment and income values in the correct sequence.
IRR Excel syntax
Syntax
IRR(values, guess)
Values is an array or a reference to cells that
contain numbers for which you want to calculate the internal rate of return.
Guess is a number that
you guess is close to the result of IRR.
https://www.youtube.com/watch?v=7FsGpi_W9XI
https://www.youtube.com/watch?v=YgVQvn51noc
Chapter 8 Stock Valuation
Dividend Growth Model
Po= D1/(rg) or Po= Do*(1+g)/(rg)
R = D1/Po+g = Do*(1+g)/Po+g
Dividend Growth
model template excel simple version  my
contribution
Dividend
growth model template excel (more complicated than the above
one, for reference)
Chapter 8 Study Guide
Imagine you bought 100 shares of WalMart
(Ticker: WMT) a year ago.
1. How is your holding period return in the prior
year?
Price in Dec 3^{rd} of 2014 was $84.94
and price of Dec 3^{rd} of 2015 is $58.78.
2. The followings are from google/finance about WMT.
Range 
58.60  59.09 
52 week 
56.30  90.97 
Open 
58.69 
Vol / Avg. 
1.16M/11.77M 
Mkt cap 
188.43B 
P/E 
12.61 
Div/yield 
0.49/3.33 
EPS 
4.66 
Shares 
3.22B 
Beta 
0.27 
Inst. own 
31% 
What does each item indicate?
3. You own 100 shares of WMT. Are you a
significant shareholder of WMT? What type of rights you have as minor
shareholders?
4. If WMT runs into trouble, how risky is your investment
in WMT? Compare with Treasury bill investors, Treasury bond investors, WMT
bond investors, Apple stock holders, etc.
5. Doug McMillon is the
CEO of WalMart. Do you have any suggestive advices for him? How can you let
him hear from you? How much do you trust him not to abuse your investment?
Are there any ways to discipline him?
6. More exercise about the dividend growth model.
Consider the valuation of a common stock that
paid $1.00 dividend at the end of the last year and is expected to pay a cash
dividend in the future. Dividends are expected to grow at 10% and the
investors required rate of return is 17%. How much is the price?
7. The current market price of stock is $90 and the
stock pays dividend of $3 with a growth rate of 5%. What is the return of
this stock?
HW of chapter
8 (answer HW will not be
collected)
1. Northern Gas
recently paid a $2.80 annual dividend on its common stock. This dividend
increases at an average rate of 3.8 percent per year. The stock is currently
selling for $26.91 a share. What is the market rate of return?
2. Douglass Gardens pays an
annual dividend that is expected to increase by 4.1 percent per year. The
stock commands a market rate of return of 12.6 percent and sells for $24.90 a
share. What is the expected amount of the next dividend?
3. IBM just paid $3.00 dividend per share to investors. The dividend growth rate is 10%. What is the expected dividend of the next year?
4. You bought 1 share of HPD for $20 in May 2008 and sold it for $30 in May 2009. How much is the holding period?
5. The current market price of stock is $50 and the stock is expected to pay dividend of $2 with a growth rate of 6%. How much is the expected return to stockholders?
6. The stockholder’s expected return is 8% and the stock is expected to pay dividend of $2 with a growth rate of 4%. How much should the stock be traded for?
7. The stockholder’s expected return is 8% and the stock is expected to pay dividend of $2 with a growth rate of 4%. How much is the dividend expected to be three years from now? (Hint: D_{3 }= D_{2}*(1+g) = D_{1}*(1+g)^{2} )
8. Kilsheimer Company
just paid a dividend of $5 per share. Future dividends are expected to grow
at a constant rate of 7% per year. The value of the stock is $42.80. What is
the required return of this stock?
9. Investors of Creamy Custard common stock earns 15% of return. It just paid a dividend of $6.00 and
dividends are expected to grow at a rate of 6% indefinitely. What is expected
price of Creamy Custard's stock?
10. Douglass Gardens pays an annual dividend that is expected to increase by 6 percent per year. The stock commands a market rate of return of 12.6 percent and sells for $24.90 a share. What is the dividend yield of this stock?
Final
Exam (Comprehensive exam)
11:0012:15
class: Tuesday, 12/8, 123pm
1:302:45
class: 12/10, 123pm
Useful website
money.msn.com/investing
zacks.com
minyanville.com
moneychimp.com
navellier.investor.com/portfoliograder/
nasdaq.com
marketwatch.com
superstockscreener.com
gurufocus.com
portfoliomoney.com
stockconsultant.com
marketgrader.com
moderngraham.com
stockpickr.com
stockta.com
thestreet.com
askstockguru.com
quotes.wsj.com
oldschoolvalue.com
fool.com
analystratings.com
barchart.com
stock2own.com
theonlineinvestor.com
seekingalpha.com