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  • Expected Return Common Stock: Inputs Last Dividend Price of Stock Expected Growth Rate Output Expected Return

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    Himanshu Patidar
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    This document contains information and calculations for estimating the expected return and price of a common stock. It shows how the expected return is calculated based on inputs like last dividend, stock price, and expected growth rate. It also models how the stock price changes based on different assumptions about growth rates, required rates of return, and cash flow projections. The key outputs are the expected return of 11.8% based on the given inputs, and tables showing how the stock price varies under different zero-growth, constant growth, and variable growth scenarios.

    Original Description:

    An excel sheet with formulas to valuate stocks.

    Original Title

    Stock Valuation

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    This document contains information and calculations for estimating the expected return and price of a common stock. It shows how the expected return is calculated based on inputs like last dividend, stock price, and expected growth rate. It also models how the stock price changes based on different assumptions about growth rates, required rates of return, and cash flow projections. The key outputs are the expected return of 11.8% based on the given inputs, and tables showing how the stock price varies under different zero-growth, constant growth, and variable growth scenarios.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as XLS, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as xls, pdf, or txt
    24 views4 pages

    Expected Return Common Stock: Inputs Last Dividend Price of Stock Expected Growth Rate Output Expected Return

    Uploaded by

    Himanshu Patidar
    This document contains information and calculations for estimating the expected return and price of a common stock. It shows how the expected return is calculated based on inputs like last dividend, stock price, and expected growth rate. It also models how the stock price changes based on different assumptions about growth rates, required rates of return, and cash flow projections. The key outputs are the expected return of 11.8% based on the given inputs, and tables showing how the stock price varies under different zero-growth, constant growth, and variable growth scenarios.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as XLS, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as xls, pdf, or txt
    of 4

    Stock Expected Return

    EXPECTED RETURN COMMON STOCK


    INPUTS
    LAST DIVIDEND
    PRICE OF STOCK
    EXPECTED GROWTH RATE

    $ 1.25 Dollar Amount


    $ 45.00 Dollar Amount
    9.00% Decimal

    OUTPUT
    EXPECTED RETURN

    11.8%
    3.8%
    4.8%
    5.8%
    6.8%
    7.8%
    8.8%
    9.8%
    10.8%
    11.8%
    12.8%
    13.8%
    14.8%
    15.8%
    16.8%
    17.8%
    18.8%
    19.8%
    20.8%
    21.8%
    22.8%

    EXPECTED RETURNS AT DIFFERENT GROWTH RATES


    25.0%

    20.0%
    EXPECTED RETURN

    0%
    1%
    2%
    3%
    4%
    5%
    6%
    7%
    8%
    9%
    10%
    11%
    12%
    13%
    14%
    15%
    16%
    17%
    18%
    19%
    20%

    11.8%

    15.0%

    10.0%

    5.0%

    0.0%
    0%

    5%

    10%

    15%
    GROWTH RATE

    20%

    25%

    Stock Price - Zero Growth

    PRICE OF COMMON STOCK - ZERO GROWTH MODEL


    INPUTS
    LAST DIVIDEND
    EXPECTED RETURN (ROR)

    3.00 Dollar Amount


    6.00% Decimal

    OUTPUT
    PRICE OF STOCK

    $ 50.00

    Stock Price - Constant Growth

    PRICE OF COMMON STOCK - CONSTANT GROWTH MODEL


    INPUTS
    LAST DIVIDEND
    EXPECTED RETURN (ROR (k)
    GROWTH RATE (g)

    1.17 Dollar Amount


    13.60% Decimal
    8.10% Decimal
    k must > g

    OUTPUT
    PRICE OF STOCK

    $
    $
    $
    $
    $
    $
    $
    $
    $
    $
    $
    $
    $

    21.27
    61.58
    40.34
    30.00
    23.88
    19.83
    16.96
    14.81
    13.15
    11.82
    10.73
    9.83
    9.07

    STOCK PRICE AT DIFFERENT RORs


    $70.00
    $60.00

    $50.00
    STOCK PRICE

    9%
    10%
    11%
    12%
    13%
    14%
    15%
    16%
    17%
    18%
    19%
    20%
    21%

    $ 23.00

    $40.00
    $30.00
    $20.00
    $10.00
    $5%

    7%

    9%

    11%

    13%

    15%

    17%

    REQUIRED RATE OF RETURN

    19%

    21%

    Stock Price - Variable Growth

    PRICE OF STOCK - VARIABLE GROWTH MODEL

    INPUTS
    LAST YEAR (e.g., 1996)
    LAST DIVIDEND
    GROWTH RATE (g)
    EXPECTED RETURN (ROR) (k)

    1996
    $ 1.17

    1997

    30.00%
    13.60% Decimal

    1998

    1999

    30.00%

    30.00%

    2000

    2001

    8.10%

    8.10% Decimal

    OUTPUT
    DIVIDENDS
    PRICE

    1.52

    1.98

    2.57

    $ 2.78
    $ 54.61

    CASH FLOWS

    1.52

    1.98

    2.57

    $ 57.39

    9%
    10%
    11%
    12%
    13%
    14%
    15%
    16%
    17%
    18%
    19%
    20%
    21%

    3.00

    $39.09

    $
    $
    $
    $
    $
    $
    $
    $
    $
    $
    $
    $

    $39.09
    114.83
    74.92
    55.48
    43.98
    36.38
    30.99
    26.96
    23.84
    21.36
    19.33
    17.64
    16.22

    STOCK PRICE AT DIFFERENT RORs


    $140.00
    $120.00
    PRICE OF STOCK

    PRESENT VALUE

    $100.00
    $80.00
    $60.00

    $40.00
    $20.00

    $6%

    11%

    16%

    REQUIRED RATE OF RETURN

    21%

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