Investments
Investments
BSC III
BSC III
Winter Semester 2010
Winter Semester 2010
Lahore School of Economics
Lahore School of Economics
Chap 10
Chap 10
Common
Common Stock
Stock Valuation
Valuation
Investments
Investments
Common Stock Valuation
Learning Objectives
Common Stock Valuation
Dividend Growth model
Zero Growth
Constant Growth
Multiple growth model
Intrinsic Value & Market price
Relative Valuation Techniques (P/E,P/S,P/S)
Components of Required Return
Capital Market Securities
Fixed Income (Bonds)
Treasuries
Corporates
Equities
Preferred Stock
Common Stock
Common Stock
It is an equity ownership in a corporation, initially
issued to raise capital
Points to keep in mind!
C/F’s are NOT known in advance
Life of stocks is forever – no maturity
Difficult to observe required rate of return for
discounting