Valuotion of- A Fined Income. = 44 C Browd) chetroaduc How ~ “The. Vabae ob an afbet Shook Wt ead. Konth aud mukh be dilermiued. he fohe making duvedtmemt duds Te heal worth ofan det Ai pevolt upou sis Capocity Yo genehele hejurns Yon tte hold of Hat ate. Fr The moklpeolis tie. Volua ou Couceptinbinance J& DOF Celiscourtecl Cash flow) BCP valuahou Jb phe metrod in which we discount all future cash in How at am appropriate Lisceunted nate to calculate its prsevt Valve. amet Bond Valuotivu;— Sntpindic value Of a bonol if He present value of alk fubure expeclect Cash duplows promi. Te fabune expec teal cash duplosé sfom howd ane im the Joh of dntrst froomes and redamblion value, ob macuni by Hence! there ant tro pants of Heintainsic Value of bond © First, phe pretent-value of all inieust ducome throughout he Liye of he bond. © Second, she present Valne of feclamption Velie at gM otvri ry. She Veluction of Abouel ib Mibeunsed Unde polletsing, Cakes \— © scanned with OKEN ScannerCase-L Annual tn tenett” Casemk Annual sulni’ P " Poco 4 Rv 8 er Ut kay “areas phat P, = dutrinsic Value of Bowe Te = Antencsr pom bonel iwyeaL- N = Matinity period of bond inyeor Rv = ReclembHon Value. boul Kd = AbbAoptiake abiscoun teal Rate x Ke find+ pare ve pe g_teinlion fee FOL He form ofan annuity. Te Zeconel pak ia Lum psum amount fobe hecerved at maturr v y + Hence. bond veluetion cam allo be expressed in the FP lowing form— To = Lx PVFPg yt RV x PVF Guu dh dutrindic Value 7 Cunnent Marke price. Buyer Bond 4h Auitningic. value < Cument Marte Fplice, Not Buy o Boud df Suttinbic value= Current Market pice SIncliffereih Cate-9. Semi-Annual Su ee - ——— © scanned with OKEN Scannerie == (PYF Awa yn) * Rv (PVF wan) | Case Suartealy Snterst Teayroeed — . unt Te/y + Rv F 7% [4 xe [ie or oR Cone-4 Similarly incase of m Hmd Comboundings , = [PUFA us maw | + RV PYF es ws] CaseS: 4ncase ek perpetual bone 4st the boul ip peapetual, then Huu 4kno mnatunity period a4 He boval aud fence wo nedemplou Value: Su uch a cake’ te injeusrincome uri Se lute sperm obey perbetaiby Lie. the Sarne amouwrt will be necerveat Svcry Jean. Johan Sufi nite. pertocl of fime- Hence tht value ofa perpetual bowel will be. the Cabitalizecl Valre of its annual turers te Valuecf a Perpetual — Annual Sutewst- Bond Ky Pa a © scanned with OKEN ScannerValucrtion of: convertible. Debentures dn cose of compuliohiy comventille beheutune Loldsna, hecetve dmteneat Con Couponk) ab Apecified Coupon Rate Joma specie! Yime. poslod, hfter coklela the debentures ake barHally on Convertible into eqity Shanes Of dha iAune “Company. Tout we Reve vue selloving Stheam of Cobh Aoflovse— D snterest received onthe face valre of clbentune ® expected makket Value of At bohton af Face, Velie olde 4A 8 Convertedl Gute eqpdty Araehs by the Turmber_ py flares ® Recmblion Value of He Aemaliing bontion ant y pte 4 Mey Fe Geen) = z Ctkaye Ct key what — ms vuamper of Shane’ deceived Ps Market price of Bhures 2 fime to convertor enyene Kes Nequined Lote P Aetrn onequity sou pow Bend VatueHou o)- Zeno Covbpown bow Zerwcouper bod WO corporate Rence no Arndt payment dh duvoluedn cash dufloes Rv PR @ea) = rk © scanned with OKEN ScannerVeld to Mortuni ty it Yuelel to Matuity popaulutly Know ab TM ib the Awterve Rate of he funn gyenenceteol by Aboud: YTM ub dhe olidcountAote which eyretes phe current moarizet price ofabond voit the present value of cabh inflows ovsSocated wih the bond dvahe fohm 2h dujendt- income. ¥- Redem pon Value - © scanned with OKEN ScannerValuation of Variable iene Secunits gore Epity Shares ‘The mtanwdic. value J on oedet JA te. prc Value of- all Jubeay cable An lows, promit dn case of Cauity Shores It ts hiffiodt 40 CbHmake Such spahne eash Uuplovs &theufore varie Of methods Aovebcen evolved dooddnen the tidve. af eyits ValuaHow: These medrooll are. — @ disceanted cash flow Models on. Diviclend cisco mods ® P/E Ratio Models @ Cabitat Aaset Pricing Moolel O Discounted cathfloes models Then conve 70 Cab Und DCF techihique for Valuation of an eyity Shoie — ZL When Aolobines period. 6 pre dleciceck onfinite, Om investor may clecielt to Aolel He Shane Yon a Bpecipech perio of Hime amd hence roulel be setti iat Bome pice atte end of jhe dvieatoment= 2 Beriod: fur we con ctdume that the expecteat dividends ev geo and Setliva price at the. eud of holobi perrod canbe Bee: bec ond to Aololiiy period ut aan then divided Unto vend Cakes — me © scanned with OKEN Scanner@) cabend. One yoan. holding Period. when Saveston Drolols yu Sbore only 7 aes on eee To Catemlate Hu ~Yaih value we need to drreout Year-end obiviclucl a Belling patce ab Aequineot rote 54 Aeon ou at _ eee UK) Cre @) Case-2 Multible Year Holebing Period The obove. Jokmula canbe extendas tothe. Case of multi ple Years Boldivg perioct- Po — tntrindic valve 2 share De -expecteol dividend inyeant eS ee De he On z Ct Ket a Cit Key Pa Selling briceatHeendoys vee tee BL when holding period 6 Juginite. "L Holding behiod inyeor Sm heal Sipe thew th wo clipinite holding petiodof common Block amd epiven the going concern Concept of a perpetual Combany Jt Uk abdume that dhe Life Bf Cymity Blore+8 albodupinile Sowe Cannot estimate, the € xpectee baling paice. Leth dn Such cate Hot Shans are valueol onthe bakit of excpected Hivickuds “throughout ihe Lite of the eqity Bhutts: Hence the future cash inflows from eqpiity Bhoms I Wothing but aw dupinite Strcom of dividends © scanned with OKEN ScannerHowever. ctifferent compan, follow 8 Aiffercud dlividsuol bode y uch ah constemt Rupee otividind Or Prowsiny ak A constant Rate on. mutHple Prowth hete&. accohdivy to oliviclwt police we Con -furtudivide Jt dn to pour Cases j— Cabe-1 No qrorode im clividendAs © Courtout Rupee Bwidenels) when He Company Th expec deal to provide ame amount Of- Aupee dividind year after dean jit ib Bald toRave heen Jollosing a Contlant obvidind policy. dn Buch cate the Juvebish. esill Recdue Same amount olividandl Cverg year gon un Jupinite period: Hence thibbecome Penpetuity. Cate —2. Contant qrocodh nate individenols Sn reality magoeity of the Companies providd you me lod Youll vider. 4 cliviclenels vsoulel gprows ah a Aakela) then Anveator voill fet plowing arrears of olividanal Yeo Niviclonel L De 2 D. Cig) 3 by argy 4 Dili+gy © scanned with OKEN Scanner‘To Cabeulate Gntpimic. Value. we need to ooh outate preset Valuer of all hese oliviclstrols = Bry Big) 4 BiGaegye oo I Ke (+key Uv key Case-B— MULH period grow thrate an ooll Amehe RealigsHe atiumbption about growdh gudividind 18 that clividunds 10 ota Wafur Rate duunivny a pews GOs abtin thet at a nokmel wr hate pondhe, Tacha its Life. Af us ardume. Bighin gfocoth Pale Ah Aa nokanat grouth Rabe th Ca) the. dutaindic velue g Albwre th — Dy Pay ne Ba HAD | = Rest cng) Ke-g * Crk Hew. B= Do(Itg,), Da= Dolltgu” 4 Book | Cabe-4 ValuaHowrofa Shane Lohich oboe’ wot bay _ Diviclenols “Thane ore a mun ber Of Companies e&peciolly im the inital Yeord of theo tein OpermHn, which clonet Pay Aiviclinols. These Comoauies Aeinvedr all op thetrn corning . Hence olividercl olcount- urt model widely, ne qAthe Dy Cannot be ubeol Rurt.Su Ruch adage. © scanned with OKEN ScannerEPS, is usect aba Prony for b ql P. EPS Ke Earwinga Multipber Rbbroach of P/E RattioModal DCF mock Aequiacs OM e&timation of “fuluae cosh Floro& of wel Hu he.qutheel hale of AeHurnron eqiteg shone Detrmenaton of Aeqpritedt ete of Aeturn Uduot 2a 4 Fence we Rave ablermative mockek fon. ote Hambuing phe duthinic Values) Katt: T+ Can alto be Cork om jhe Sodla Of PIE mutt plier ga Laatend Yrice Perret Reponted PIE = “eo Moat Recent EPS - (Goa oF Senden) E/E x Expeced EPS Capita Ais aeing Medel Comm) Sharpe (1965) clavelopect CAPM to provi kk om eat mote of- the heydhed Frode ofa rebuan oncr Becwrily bodectow 146 Agbte male niBk- Mods modsh Bets Hot pu 4$ 4 dukect nelaHou Ship between Aetorn ouRecunite R iM Aypremake 9b KK E (Ri) = Re + LEC) Re) Bi Whee cp. = expecteolAetuen onSecurily Ry = Ribk prec date of retorts ECRum) > Ex pecttel Aedeth oumorkerJualey Bie = Bela of Security L © scanned with OKEN ScannerExpeckd _ RidK Free 4 Rib Premium Retuan ~ REpArn epee Wee ue g Seybtermosic Past | = RUSKEACE 4 Tptacnet Rise x Se Ke fuam Repuan [ Premium Mean. J This exbecteal rote of return UB noldinhg but He Aeqpihed! hate of retrn vohich Ud usecl as dikeounted rete + the Aleut veluarHow sect modus - Hence Ke = Re + LER] Be © scanned with OKEN Scanner