Beruflich Dokumente
Kultur Dokumente
What should be
managements primary
objective?
FCF1
(1 +
WACC)1
FCF2
(1 +
WACC)2
FCF
(1 + WACC)
11
Steps in Financial
Forecasting
Forecast sales
Project the assets needed to support
sales
Project internally generated funds
Project outside funds needed
Decide how to raise funds
See effects of plan on ratios and stock
price
12
what is AFN?
AFN = (A*/S0)S - (L*/S0)S - M(S1)
(RR)
13
Higher sales:
Implications of AFN
17
Working Capital
Management
18
Inventory
Receivables Payables
Conversion =Conversion + Collection - Deferral
.
Period
Cycle
Period
Period
19
23
= $55,560
= 13,890
= $41,670
24
365 days
Days
Discount
Taken
Period
365
= 0.0101
30 12.1667
= 0.1229 = 12.29%
28
I%
PMT
PMT
PMT
PMT
PMT
Annuity Due
0
I%
PMT
29
FV Annuity Formula
(1+I)N-1
I
(1+0.10)3-1
0.10
=
331
30
PV Annuity Formula
1
I
(1+I)N
31
8%; Quarterly
8%, Daily interest (365 days)
32
Examples:
FVN = PV 1
+
INOM
M
MN
34
35
FV = $1 (1.06)2 = 1.1236.
EFF% = 12.36%, because $1 invested for
one year at 12% semiannual
compounding would grow to the same
value as $1 invested for one year at
12.36% annual compounding.
36
Comparing Rates
37
INOM
1 +
M
0.12
1 +
2
= (1.06)2 - 1.0
= 0.1236 =
12.36%.
38
39
Bond Valuation
40
41
1,000
30
25
20
15
10
42
Whats yield to
maturity?
44
Definitions
Annual coupon pmt
Current yield =
Current price
Capital gains yield = Change in price
Beginning price
Exp total = YTM =
Exp
Exp
cap
+
return
Curr yld
gains yld
45
46
47
Probability Distribution:
Which stock is riskier?
Why?
48
stock 35%
Many stocks 20%
49
Company Specific
(Diversifiable) Risk
35%
20%
Market Risk
0
10
20
30
40
2,000 stocks
50
Using a Regression to
Estimate Beta
New SML
I = 3%
SML2
SML1
18
15
Original situation
11
8
0
0.5
1.0
1.5
Risk, bi
56
r (%)
After change
SML2
SML1
18
RPM = 3%
15
Original situation
1.0
Risk, bi 57
Portfolio Theory
58
Expected return
20%
15%
10%
5%
0%
0%
10%
20%
Risk,
30%
40%
59
Expected return
20%
15%
10%
5%
0%
0%
10%
20%
30%
40%
Risk, p
60
Expected return
15%
10%
5%
0%
0%
5%
10%
Risk, p
15%
20%
61
Efficient Set
Feasible Set
Risk, p
62
Optimal Portfolios
Expected
Return, rp
IA2
IA1
IB2 I
B1
Optimal
Portfolio
Investor B
Optimal Portfolio
Investor A
Risk p
63
Z
M
^r
M
rRF
rRF +
Intercept
^
rM - rRF
M
Slope
p.
Risk
measure
66
Expected
Return, rp
^r
M
^r
I1
CML
.
.
R = Optimal
Portfolio
rRF
Risk, p
67
Stock Valuation
68
69
D1
=
rs - g
70
V/EBITDA
V/Sales
71
72
73
74
Disadvantages of Going
Public
79
80
81