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33 Cards in this Set
- Front
- Back
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5 elements industry structure |
1. Threat new entrants 2 threat subsitutes 3 bargaining power of buyers 4 bargaining power of suppliers 5 rivalry of current competitors |
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3 strategies |
1 cost leadership 2 product differentation 3 focus- employing strategy 1 or 2 within a segment of the industry |
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Broad Equity risk premium(return over rf investors require) |
Rf+B*equity risk premium |
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IRR |
Rate that equates dcf to current price. If markets are efficient than IRR = rr |
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3 estimated for risk premium |
1 gordon growth 2 macroeconomic models 3 survey estimates |
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Ggm (rp? And return?) |
1yr forecasted div REturn + LT earnings GRowth - LT gov bond yield....(d/p)+g - Rlt |
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Holding period return |
P1+cf/p0 |
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Most holding perio return annualized...1% for a month |
1+.01^12-1 |
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Required return= opp cost |
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Expected return price convergence |
V-p0 / p0 |
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Equity risk premium |
Rr on equity - rf |
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Gordon growth uses long term rf while others usually short |
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Price convergence..expected return |
Rr + (intrinsic value-p0)/ p0 |
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Ggm |
(D/p) + g- r which is fwd looking risk premium |
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1 weakness of constant or ggm is that it uses stable growth. For em equtiy index price = |
Pv rapid+Pv transition + Pv mature |
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Macro/supply side estimates only good for developed as public equitites need to represent large share of economy for there to be a relationship= |
(1+exp inflation)*(1+exp real EPS gr)*(1+exp P/E change)-1+Yield on INdex(**INcome component)- Rf |
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Estimate exp inflation |
Tbonds yield - TIPS with comparable maturities |
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Exp Eps growth = real GDP growth= |
Growth in labor productivity + g in labor supply |
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PEg estimated on if analyst thinks market is over or under valued. |
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Capm= rf+beta*rp |
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Required return multifactor model |
Rf+Rp1+Rp2
Rp= factor sensitivity*factor risk premium |
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Fama french |
Rf+beta *(Rmkt-rf)+Bsmb*(Rsmall-Rbig) + Bhml(Rhbm-Rlbm)...hb is high book vale |
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Pastor stambaugh.... Less liquid have pos beta more liquid neg beta |
Same factors as fema fema but at the end (liquidity * liquidity premium) |
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Macroeconomic multi models |
Rf +(sen1*conf risk) +(sens2*time hori) etc |
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Build up model forncompanies with no beta RR= |
Rf+ rp+ size prem+spec company prem |
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Bond yield rp coe ...used if they have publicly traded debt |
Bond ytm + equity risk premium |
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Beta drift is beta moving back to 1 |
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Blume method to adjust beta |
2/3 * regression beta +(1/3 *1) |
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Beta steps for thinly traded or non public |
1 find a public comp company XZ 2 find its beta 3 unlever its beta =beta of XZ *(1/(1+(debt/equity))) 4 lever the unlevered beta for XZ using oroginal comps debt and equity = beta * (1+(debt/equity)) |
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Postivies and negatives of diff ways of finding RR Capm simple but onlyn1 factor and if in more than 1 market theres more than 1 rr Mulitfactor have higher explanatory power but more complex and expensive Build up simple and apply to private comps. Butnuse historical values that may not be relevant anymore |
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Cost of cap is rr of those who supply capital...WACC |
Debt/market value debt+equity*Rd*(1-marginal t) + equity / market value debt+equity* Re |
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What stage -Ddm for new fast-negative FCFE -For transitional with poaitive growing FCFE and decreasing Capex -ggm |
3 stage 2 stage Best for mature with stable constant divy |
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Per share 56. 5mm shares. Debt ratio .3(ie equity is 70%). What is current value |
Value is equity and debt...Equity is 56*5=280...which is 70% so tot value is 280/.7=400 |
