FIN 3701 Chapter 4 :Preferred and Common
Stocks
Stock Valuation
Assumption University of Thailand
FIN3701
Corporate
Finance
Chapter 4
Preferred and
Common Stocks
“Genius is 90%
perspiration and
10% inspiration”
T. Edison
Warren Buffet
Source: http://www.quotespin.com
Dr. Chainarin Srinutchasart
Source: http://bgr.com
2
1
Objectives
Principles Applied in This Chapter
• In this chapter, you will learn
• Features of preferred stock
• Determining preferred stock values
• Features of common stock
• Determining common stock values
• Principle 1: Money Has a Time Value.
• Principle 2: There is a Risk-Reward Tradeoff.
• Principle 3: Cash Flows are the Source of
Value.
• Principle 4: Market Prices Reflect Information.
• Principle 5: Individuals Respond to
Incentives.
3
Corporate Finance addresses
the following 3 questions:
4
The Balance-Sheet Model of the
Firm
1. What long-term investments should the firm
engage in?
2. How can the firm raise money for the
required investments? (Alternatives: Bonds,
Stocks, Preferred Stocks=what is the
appropriate price?)
3. How much short-term cash flow does a
company need to pay its bills? and how to
raise it
5
The Capital Structure Decision (Ch. 12, 15, 18)
(Financing Decision)
Current Liabilities
Current Assets
Fixed Assets
1 Tangible
2 Intangible
How can the
firm raise
the money
for the
required
investments?
Long-Term Debt
This ch.
Shareholders’
Equity
6
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FIN 3701 Chapter 4 :Preferred and Common
Stocks
Debt vs. Equity
Preferred Stock
“Raising the capital: Tools”
Fixed Claim
Tax Deductible
High Priority in Financial Trouble
Fixed Maturity
No Management Control
Debt
Bank Debt
Commercial Paper
Corporate Bonds
Residual Claim
Not Tax Deductible
Lowest Priority in Financial Trouble
Infinite
Management Control
Hybrid Securities
Convertible Debt
Preferred Stock
Option-linked Bonds
Equity
Owner's Equity
Venture Capital
Common Stock
Warrants
What we will cover for this chapter
Source: http://i0.sinaimg.cn
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Preferred Stock
Preferred Stock
A hybrid security:
• It’s like common stock - no fixed maturity.
• Technically, it’s part of equity capital.
• It’s like debt - preferred dividends are fixed.
• Missing a preferred dividend does not
constitute default, but preferred dividends
are cumulative. (and preferred dividends
need to be paid before common stock’s
dividends)
• Usually sold for $25, $50, or $100 per share.
• Dividends are fixed either as a dollar amount
or as a percentage of par value.
• Example: In 1988, Xerox issued $75 million of
8.25% preferred stock at $50 per share.
• $4.125 is the fixed, annual dividend per
share.
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When to issue a preferred stock?
Preferred Stock Features
• The company already has too high level of
debt.
• Firms may have multiple classes of
preferreds, each with different features.
• Priority: lower than debt, higher than
common stock. (Claim of EBIT)
• **Cumulative feature: all past unpaid
preferred stock dividends must be paid before
any common stock dividends are declared.
• And they don’t want to dilute the ownership
interest of common stock holders.
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FIN 3701 Chapter 4 :Preferred and Common
Stocks
Preferred Stock Features
Preferred Stock Valuation
• PIK Preferred: Pay-in-kind preferred stocks
pay additional preferred shares to investors
rather than cash dividends.
• Retirement: Most preferreds are callable,
and many include a sinking fund provision to
set cash aside for the purpose of retiring
preferred shares.
• A preferred stock can usually be valued
like a perpetuity:
Source: http://www.palmbeachperfumes.com
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Type of Value
Security Valuation
• Book value: value of an asset as shown on a
firm’s balance sheet; historical cost.
• Market value: observed value of an asset in
the marketplace; determined by supply and
demand.
• Intrinsic value: economic or fair value of an
asset; the present value of the asset’s
expected future cash flows.
• In general, the intrinsic value of an asset =
the present value of the stream of expected
cash flows discounted at an appropriate
required rate of return.
• Can the intrinsic value of an asset differ
from its market value?
15
Valuation
Preferred Stock Valuation
n
V =
16
S
t=1
• Discount the Preferred stock’s cash flows
(Dividend) at the investor’s required rate of
return.
$Ct
(1 + k)t
• Ct = cash flow to be received at time t.
• k = the investor’s required rate of return.
• V = the intrinsic value of the asset.
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3
FIN 3701 Chapter 4 :Preferred and Common
Stocks
Preferred Stock Valuation
Mathematically,
1
• Discount the preferred stock’s cash flows at
the investor’s required rate of return.
• The DIV payment stream (perpetuity).
(PVIFA i, n ) =
1 – (1 + i)n
i
We said that a perpetuity is an annuity
where n = infinity. What happens to this
formula when n gets very, very large?
19
When n gets very large,
1
1 – (1 + i)n
i
So, Preferred Stock Valuation
• A preferred stock can usually be valued like
a perpetuity:
this becomes zero.
So we’re left with PVIFA =
20
Vps =
1
i
D
k ps
21
Example:
• Xerox preferred pays an 8.25% dividend on
a $50 par value.
• Suppose our required rate of return on Xerox
preferred is 9.5%.
Vps
=
4.125
22
Expected Rate of Return on
Preferred
• Just adjust the valuation model:
kps
= $43.42
=
D
Po
.095
23
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4
FIN 3701 Chapter 4 :Preferred and Common
Stocks
Example
Example
• If we know the preferred stock price is $40,
and the preferred dividend is $4.125, the
expected return is:
• If we know the preferred stock price is $40,
and the preferred dividend (Annually) is
$4.125, the expected return is:
k ps =
D
Po
4.125
=
40
=
25
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Example
• If we know the preferred stock price is $40,
and the preferred dividend is $4.125, the
expected return is:
Common Stocks
k ps
D
=
Po
4.125
=
= .1031
40
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Common Stock
Debt vs. Equity
“Raising the capital: Tools”
Fixed Claim
Tax Deductible
High Priority in Financial Trouble
Fixed Maturity
No Management Control
Debt
Bank Debt
Commercial Paper
Corporate Bonds
Common stock = owner
Bond = creditor
Preferred stock = hybrid
Source: http://computerwoche.de
Residual Claim
Not Tax Deductible
Lowest Priority in Financial Trouble
Infinite
Management Control
Hybrid Securities
Convertible Debt
Preferred Stock
Option-linked Bonds
Equity
Owner's Equity
Venture Capital
Common Stock
Warrants
What we will cover for this chapter
29
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5
FIN 3701 Chapter 4 :Preferred and Common
Stocks
Common Stock
Common Stock: Owners, Directors,
and Managers (In theory)
•
•
•
•
•
• Is a variable-income security.
• Dividends may be increased or decreased,
depending on earnings.
• Includes voting rights.
• Limited liability: liability is limited to amount
of owners’ investment.
• Priority: lower than debt and preferred.
Represents ownership in a corporation.
Ownership implies control.
Agency
Stockholders elect directors.
Cost
Directors hire management.
arises
Since managers are “agents” of
shareholders, their goal should be:
Maximize stock price. (That’s why we need
to know how to value a stock)
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Understanding Stock Share Terms
Understanding Stock Share Terms
• Authorized Shares – These shares represent the
total number of shares of stock authorized when
the company was created. Only a vote by the
shareholders can increase this number of shares.
However, just because a company authorized a
certain number of shares doesn’t mean it must
issue all of them to the public. Most companies
retain shares for use later called unissued stock or
shares.
• Restricted Shares – Restricted shares refer to
company stock used for employee incentive and
compensation plans. Restricted stockowners need
permission of the SEC to sell. There is a waiting
period after a company first goes public where
insiders’ restricted stock is frozen. When insiders
want to sell their stock, they must file a form with
the SEC declaring their intention. Even insiders of
established companies must file with the SEC
before selling their restricted stock.
• Float Shares – Float refers to the number of
shares actually available for trade on the open
market. You and I can buy these shares.
• Unissued Shares – Shares a company retains in
its treasury and not issued to the public or to
employees are unissued shares.
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Understanding Stock Share Terms
• Outstanding Shares – Outstanding shares
includes all the shares issued by the company,
which would be the restricted shares plus the float.
• Treasury Shares – Previously issued stock that
has been repurchased by the company. Buying
treasury stock is an alternative to paying
dividends. Since outstanding shares will be fewer
after stock has been repurchased, EPS will rise.
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Here’s a simple example with numbers to
illustrate the relationship of these
different shares:
•
•
•
•
•
Authorized Shares – 100
Unissued Shares – 20
Restricted Shares – 10
Float – 70 (100 – 20 – 10 = 70)
Outstanding Shares – 80 (10 + 70 = 80)
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FIN 3701 Chapter 4 :Preferred and Common
Stocks
Why is this Important?
Why is this Important?
• Look at the relationship of unissued shares
and restricted shares to float for where
controlling interest of the company will reside.
Many companies retain a large percentage of
the authorized shares in their treasuries or in
the hands of management through restricted
shares. Companies do this to make sure no
other company can seize control in an
unfriendly takeover. They may also want to
have stock handy for future issue instead of
using debt to buy another company or for
another major expenditure.
• If the float of a company is very small and the
stock attracts attention of investors it can
become volatile because of supply and
demand imbalances.
More buyers will drive the price up, which is
not a bad thing if you own the stock.
However, it may make the stock over priced
relative to its earnings or other fundamental
measures.
Likewise, if the stock falls out of favor, sellers
may have trouble unloading their shares,
which would tend to force the price down
further and more rapidly than fundamentals
might indicate.
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Common Stock Characteristics
Common Stock Characteristics
• Claim on Income - a stockholder has a claim
on the firm’s residual income.
• Claim on Assets - a stockholder has a
residual claim on the firm’s assets in case of
liquidation.
• Preemptive Rights - stockholders may share
proportionally in any new stock issues.
• Voting Rights - right to vote for the firm’s
board of directors.
Voting Rights
• Most shareholders vote by proxy. A proxy
gives a designated party the temporary
power of attorney to vote for the signee at
the corporation’s annual meeting.
• There are two commonly used procedures
for voting: majority voting and cumulative
voting.
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Common Stock Characteristics
Example of Proxy Statement
Voting Rights
• Majority Voting: Each share of stock allows
the shareholder one vote, and each position
on the board is voted on separately.
Because each member of the board is
elected by a simple majority, a majority of
shares has the power to elect the entire
board of directors.
Source: http://img.ehowcdn.com
41
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FIN 3701 Chapter 4 :Preferred and Common
Stocks
Common Stock Characteristics
Voting Rights
• Cumulative Voting: Each share of stock
allows the shareholders a number of votes
equal to the number of directors being
elected. The shareholders can use all his or
her votes for a single candidate or split
them among the various candidates. The
advantage of cumulative voting is that it
gives minority shareholders the power to
elect a director.
Return of Common Stocks
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Calculating the Realized Return
from an Investment
Calculating the Realized Return
from an Investment (Cont.)
• Realized return or cash return measures the
gain or loss on an investment.
• Example: You invested in 1 share of Apple
(AAPL) for $95 and sold a year later for $200.
The company did not pay any dividend during
that period. What will be the cash return on
this investment?
Cash
Ending
Cash Distribution _ Beginning
+
=
Return
Price
(Dividend)
Price
Source: http://theapplecollection.com
45
Calculating the Realized Return
from an Investment (Cont.)
46
Calculating the Realized Return
from an Investment (Cont.)
• Example: You invested in 1 share of Apple
(AAPL) for $95 and sold a year later for $200.
The company did not pay any dividend during
that period. What will be the cash return on
this investment?
47
Cash
Ending
Cash Distribution _ Beginning
+
=
Return
Price
(Dividend)
Price
• Cash Return = $200 + 0 - $95
= $105
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FIN 3701 Chapter 4 :Preferred and Common
Stocks
Calculating the Realized Return
from an Investment (Cont.)
Calculating the Realized Return
from an Investment (Cont.)
• We can also calculate the rate of return as a
percentage. It is simply the cash return
divided by the beginning stock price.
• Example: You invested in 1 share of share
Apple (AAPL) for $95 and sold a year later for
$200. The company did not pay any dividend
during that period. What will be the rate of
return on this investment?
Cash
Ending Cash Distribution _ Beginning
Return
Price +
(Dividend)
Price
Rate of
=
=
Return Beginning
Beginning
Price
Price
49
50
Calculating the Realized Return
from an Investment (Cont.)
Cash
Ending Cash Distribution _ Beginning
Return
Price +
(Dividend)
Price
Rate of
=
=
Return Beginning
Beginning
Price
Price
• Rate of Return = ($200 + 0 - $95) ÷ 95
= 110.53%
• Next table has additional examples on
measuring an investor’s realized rate of
return from investing in common stock.
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What drives the stock price?
What is the
reasonable price
for a common
stock?
Source: http://www.orientalwatchsite.com
Valuation techniques
“the future cash flows expected by
market players”
Source: http://www.jobonomics.com
53
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FIN 3701 Chapter 4 :Preferred and Common
Stocks
Basic Common Stock Valuation
(Single Holding Period)
Basic Security Valuation
• In general, the intrinsic value of an asset
= the present value of the stream of
expected cash flows discounted at an
appropriate required rate of return.
• You expect XYZ stock to pay a $5.50
dividend at the end of the year. The stock
price is expected to be $120 at that time.
• If you require a 15% rate of return, what
would you pay for the stock now?
Source: http://sombomull.blogspot.com
?
5.50 + 120
0
1
55
Basic Common Stock Valuation
(Single Holding Period)
56
Basic Common Stock Valuation
(Single Holding Period)
Solution:
Financial Calculator solution:
Price or Vcs = (5.50/1.15) + (120/1.15)
P/Y =1, I = 15, n=1, FV= 125.50
solve: PV = -109.13
or:
P/Y =1, I = 15, n=1, FV= 120,
PMT = 5.50
solve: PV = -109.13
= 4.783 + 104.348
= $109.13
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Valuation of Common Stock
(actual approaches to value the stock)
Valuation of Common Stock
(actual approaches to value the stock)
1. Discounted Cash Flow Techniques (DCF)
• PV of Dividends (DDM)
• PV of Free Cash Flow to Equity (FCFE)
• PV of Free Cash Flow to Firm (FCFF)
• PV of Free Cash Flow to Firm (FCFF) by
using the percent of sales method
2. Relative valuation techniques
• Price-earnings ratio (P/E)
• Price-cash flow ratios (P/CF)
• Price-book value ratios (P/BV)
• Price-sales ratio (P/S)
59
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10
FIN 3701 Chapter 4 :Preferred and Common
Stocks
When is a company going to pay
it’s dividend (mostly)?
Dividend Discount Model
(DDM)
Decline
Maturity
SALES
Intrinsic Valuation
Growth
Introduction
Product Life Cycle Curve
Source: http://wikimedia.org
61
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Intrinsic Valuation
Stock Value = PV of Dividends
Dividend Discount Method
• The price of a stock reflects the present value
of the stock's future dividends
• t = period
• Dt = dividend in period t
• kcs or rs = discount rate

Dt
Price  
t
t 1 (1  rs )
Pˆ0 
D1

D2

D3
1  rs 1 1  rs 2 1  rs 3
 ...

Price  
t 1
Dt
(1  rs) t
What is a constant growth stock?
D
One whose dividends are expected to
grow forever at a constant rate, g.
1  rs 
63
How to get “g”
>>Internal Growth (growing what?)
64
Example
• Let’s assume that the return on equity (ROE)
for AA company is 16 percent.
• If AA’s management decides to pay all the
profits out in dividends to its stockholders, the
firm will experience no growth internally
(right?).
• It might become larger by borrowing more
money or issuing new stocks (growth
externally), but internal growth will come only
through the retention of profits (Net Income).
• Use retained earnings to finance new
investments.
• Why not debts? Or issuing new stocks?
Source: http://biomassmagazine.com
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FIN 3701 Chapter 4 :Preferred and Common
Stocks
Example (Cont.)
How to find growth rate (g)
• If, however, AA retains all the profits, the
stockholders’ investment in the firm would
grow by the amount of profits retained, or by
16 percent.
• If, however, management kept only 50
percent of the profits for investment, the
common shareholders’ investment would
increase only by half of the 16 percent return
on equity, or by 8 percent.
g = ROE x retention rate or
g = ROE x (1 – dividend payout ratio)
Where
ROE = net income / total equity(BV)
Therefore, if only 25 percent of the profits
were retained by AA, we would expect the
common stockholders’ investment in the firm
and the value of the stock price to increase
or grow by only g= 16% x 0.25 = 4%
67
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For a constant growth stock,
D1  D0 1  g
2
D2  D0 1  g
t
Dt  Dt 1  g
1
What happens if g > rs?
**The most recent
dividend
D1
Pˆ0 
requires rs  g .
rs  g
• If rs< g, get negative stock price, which is
nonsense.
If g is constant, then
(Gordon’s Growth Model):
D 1  g 
D1
Pˆ0  0

rs  g
rs  g
Preferred
Stock; g =0
• We can’t use model unless (1) g  rs and
(2) g is expected to be constant forever.
69
What’s the stock’s intrinsic value?
D0 = 2.00, rs = 13%, g = 6%.
D0 was $2.00 and g is a constant 6%.
Find the expected dividends for the next
3 years, and their PVs. rs = 13%.
0
1
2
2.12
2.2472
3
70
Constant growth model
(Gordon Growth Model):
4
D 1  g D1
Pˆ0  0

rs  g
rs  g
g=6%
D0=2.00
1.8761
2.3820
13%
1.7599
=
1.6508
71
$2.12
0.13 - 0.06
=
$2.12
0.07
= $30.29.
72
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FIN 3701 Chapter 4 :Preferred and Common
Stocks
For a stock you have two sources of profit
(loss): price increase (decrease), and
dividends. Thus,
(P1 - P0) + Dividend
kt = actual return =
P0
(3)
P1 - P0
Dividend
+
P0
P0
= capital gains yield + dividend yield
What is the stock’s intrinsic value one
^
year from now, P1?
D1 will have been paid, so expected dividends
are D2, D3, D4 and so on. Thus,
D
Pˆ1  2
rs  g
Where,
• P1 = value of asset at the end of the period
• P0 = value of asset at the beginning or current
of the period
• k1 = actual return over period "t"
• P1 - P0 = capital gain (loss)
• yield = return
= $2.2427 = $32.10
0.07
73
74
Find the total return during
the first year.
Find the expected dividend yield and capital
gains (CG) yield during the first year.
Dividend yield =
D1
=
P0
CG Yield =
^
P1 - P0
P0
$2.12
• Total return = Dividend yield +
Capital gains yield.
• Total return = 7% + 6% = 13%.
• Total return = 13% = rs.
• For constant growth stock:
Capital gains yield = 6% = g.
= 7.0%.
$30.29
$32.10 - $30.29
=
$30.29
= 6.0%.
76
75
What would P0 be if g = 0?
Rearrange model to rate of return form:
The dividend stream would be a perpetuity.
Pˆ0 

D1
D
to r s  1  g .
rs  g
P0
0
^
Then, rs = $2.12/$30.29 + 0.06
= 0.07 + 0.06 = 13%.
rs=13%
^
P0 =
77
D
r
=
1
2
3
2.00
2.00
2.00
$2.00
0.13
= $15.38.
78
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FIN 3701 Chapter 4 :Preferred and Common
Stocks
Nonconstant growth followed by constant
growth:
Ex2:If we have supernormal growth of
30% for 3 years, then a long-run constant
g = 6%, what is P^0? r is still 13%. (D0 = 2)
0
1
rs=13%
g = 30%
D0 = 2.00
• Can no longer use constant growth model.
• However, growth becomes constant after
3 years.
2
g = 30%
2.60
3
g = 30%
3.38
4
g = 6%
4.394
4.6576
2.3009
2.6470
3.0453
$4.6576
Pˆ3 
 $66.5371
0.13  0.06
46.1135
^
54.1067 = P0
79
What are the annual dividend and
capital gains yield?
Ex3:If g = -6%, would anyone buy the
stock? If so, at what price?
Capital gains yield = g = -6.0%.
Firm still has earnings and still pays
^ > 0:
dividends, so P
0
Dividend yield = 13.0% - (-6.0%)
= 19.0%.
D 1  g D1
Pˆ0  0

rs  g
rs  g
=
$2.00(0.94)
0.13 - (-0.06)
=
$1.88
0.19
80
Both yields are constant over time, with the
high dividend yield (19%) offsetting the
negative capital gains yield.
= $9.89.
81
What Causes Stock Prices to Go Up and
Down?
82
EX4: Stock value vs. changes in rs and g
D1 = $2, rs = 10%, and g = 5%:
P0 = D1 / (rs-g) = $2 / (0.10 - 0.05) = $40.
What if rs or g change?
• Equation indicates that there are three
variables that drive share value:
• The most recent dividend (D0),
• Investor’s required rate of return (rcs ), and
• Expected rate of growth in future dividends
(g).
rs
9%
10%
11%
83
g
4%
40.00
33.33
28.57
g
5%
50.00
40.00
33.33
g
6%
66.67
50.00
40.00
84
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FIN 3701 Chapter 4 :Preferred and Common
Stocks
Intrinsic Valuation
Are volatile stock prices consistent
with rational pricing?
Dividend Discount Method
• Small changes in expected g and rs cause
large changes in stock prices.
• Limitations of the Dividend Discount Model
• Potential errors in estimating dividends
• Potential errors in estimating growth rate
• Potential errors in estimating required return
• Not all firms pay dividends
– Technology firms
– Biomedical firms
• As new information arrives, investors
continually update their estimates of g and
rs .
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Valuation of Common Stock
(actual approaches to value the stock)
Valuation of Common Stock
(actual approaches to value the stock)
1. Discounted Cash Flow Techniques (DCF)
• PV of Dividends (DDM)
• PV of Free Cash Flow to Equity (FCFE)
• PV of Free Cash Flow to Firm (FCFF)
• PV of Free Cash Flow to Firm (FCFF) by
using the percent of sales method
2. Relative valuation techniques
• Price-earnings ratio (P/E)
• Price-cash flow ratios (P/CF)
• Price-book value ratios (P/BV)
• Price-sales ratio (P/S)
87
Relative Valuation
88
Mr. S wanna buy
a new house in
Washington DC.
Using the Stock Price Multiples
Source: http://presstv.ir
89
90
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FIN 3701 Chapter 4 :Preferred and Common
Stocks
He knows what he wants
How much should it be?
How do I know?
What about
here?
Not a
chance
bro!
Source: http://s2.hubimg.com
Source: http://real-estate-washingtondc.com & universityofmakeup.com
91
Mr. S goes around looking at the prices
paid for houses in the neighborhood
92
So.. He goes around looking at the prices
paid for similar houses (in terms of the quality)
in the neighborhood
Is cheaper
better?
$100,000
AVG the prices
Nope!
Coz… diff
quality
And his house should never be more
expensive than the AVG prices for
the same quality houses In the same
area>>> relative price
$25,000
Source: http://cebuhomeproperties.wordpress.com
& http://fineartamerica.com
Source: http://www.monterose.com, mrwilliamsburg.com & 2.imimg.com
93
What about stocks?
(sector: technology, industry:personel
computer)
94
>>So… before you compare, you got to
standardize first!
HOW?
Divided the price by a common
variable such as cash flow,
risk and growth rate
$14.3 / share
$366.99 / share
$25.78 / share
Create multiples
Unit: times (X)
Is cheaper better?
Can you even compare the prices?
• Current Multiples
• Trial Multiples
• Forward Multiples ***
P/E, P/S, P/CF, P/BV
Source: http:// latestlaptop.biz, theapplecollection.com & gemind.com.br
95
96
16
FIN 3701 Chapter 4 :Preferred and Common
Stocks
Relative Valuation
Multiple: Forward P/E
Where E is expected
earning next year
7.08X
4.5X
Price-Earnings (PE) Method
• Apply the average PE ratio of publicly traded
competitors
• Use expected earnings rather than historical
• Equation:
5.57X
Company’s
Stock
= Expected EPS x AVG industry PE ratio
Price
Which one is cheapest in terms of
expected earning?
Source: http:// latestlaptop.biz, theapplecollection.com & gemind.com.br
97
98
Valuing Common Stock Using the
P/E Ratio
Valuing Common Stock Using the
P/E Ratio (Cont.)
The Heels Shoe Company sells a line of athletic
shoes for children and young adults including cleats
and other specialty footwear used for various types
of sports. The company is privately owned and is
considering the sale of a portion of its shares to the
public. The company owners are currently in
discussions with an investment banker who has
offered to manage the sale of shares to the public.
The critical point of their discussion is the price that
Heels might expect to receive upon the sale of its
shares.
The investment banker has suggested that this price
can be estimated by looking at the P/E multiples of
other publicly traded firms that are in the same
general business as the Heels Shoe Company and
multiplying their average P/E ratio by Heels’
expected EPS for the coming year. Last year the
Heels Shoe Company had earnings of $1.65 per
share for the 12-month period ended in March, 2009.
Heels’ CFO estimates that company earnings for
2010 will be $1.83 a share.
99
100
Valuing Common Stock Using the
P/E Ratio (Cont.)
Valuing Common Stock Using the
P/E Ratio (Cont.)
The investment banker suggested that estimation of
an appropriate P/E ratio involves looking at the P/E
multiples for similar companies. As a preliminary
step they suggested that Heels’ management team
consider the P/E multiples of three companies:
Deckers Outdoor Corp. (DECK), Nike (NKE), and
Timberland Co. (TBL). The expected P/E ratios for
these firms are as follows:
• What is your estimate of the price of
Heels’ shares based on the above comparable
P/E ratios?
101
P/E Ratio
Deckers
Nike
Timberland
Average
26.85
18.79
22.18
22.61
102
17
FIN 3701 Chapter 4 :Preferred and Common
Stocks
STEP 1: Picture the problem
STEP 2: Decide on a solution strategy
The P/E valuation method is deceptively
simple in that the analytics are simple.
The estimated price per share is simply the
product of the firm's estimated earnings per
share for the coming year multiplied by
what the analyst estimates to be an
appropriate P/E ratio. That is, substitute
into Equation (10-4):
P/E Valuation (2009)
$41.38
45
40
35
30
25
$22.61
20
15
10
5
$1.83
Vcs = P/E1 x E1
0
Earnings per share x P/E multiple = Stock price
103
104
STEP 3: Solve
STEP 4: Analyze (Cont.)
Substituting Equation (10-4) we estimate
that Heels' share price to be $41.38:
Vcs = P/E1 x E1 = 22.61 x $1.83 = $41.38
Also, since the sale of a privately held
company's shares to the public can take
several months, this estimate is contingent
on no significant changes in the market.
For example, if inflation worsens and the
country slips into a recession, the P/E
multiples of all public companies may fall.
For this reason the final offering price for a
firm's shares that are being sold to the public
is typically set the night before the offering
and reflects the most recent P/E ratios of
comparable firms.
STEP 4: Analyze
Based on the P/E ratios of these three
comparable firms we estimate the offering
price of Heels' shares to be $41.38.
However, this estimate is contingent on
the appropriateness of the comparable set
of companies to the Heels Shoe Company.
105
Relative Valuation Decision Rule
• Market P/E > Industry P/E > Stock P/E
(Undervalued)
106
Problems with Market Multiple
Methods
• It is often hard to find comparable firms.
• Differences in earnings forecasts (differences
in accounting method and window dressing).
• The average ratio for the sample of
comparable firms often has a wide range.
• For example, the average P/E ratio might
be 20, but the range could be from 10 to
50. How do you know whether your firm
should be compared to the low, average,
or high performers? (you are going to use
mean, mode, median or what?)
• Market P/E < Industry P/E < Stock P/E
(Overvalued)
• Market P/E > Industry P/E < Stock P/E
(Overvalued compared to the market)
107
108
18
FIN 3701 Chapter 4 :Preferred and Common
Stocks
Intrinsic vs. Relative Valuation
“Relative valuation should be
thought of not as a substitute but as
a complement of intrinsic valuation”
How to Read the Stock Table
109
Common Stock Price Quotes
The following is typical of what you would see if you looked
at www.google.com/finance.
Stock Price and
Change from
Previous Day: For
Disney, the current
price is $23.19,
which represents a
decline of 1.53% or
$0.36 from the
previous day's
closing price.
Name and Symbol:
These are used to
identify the stock.
For example, the
symbol for Disney is
"DIS." You can also
use the stock's
symbol when using
online systems to
look up information
on the stock.
Open, High
and Low: On this
day, Disney's stock
price opened the
day at $23.08, and
ranged between
a high of $23.25
and a low of $22.95.
Mkt Cap:
Market
Cap refers
to the total
value of all
the
company's
common
stock
outstanding.
52Wk High and
52Wk Low: These
are the highest and
lowest prices paid for
the stock over the pas
52 weeks, excluding
the latest day's trading.
These prices will give
you a sense of the
direction the stock
price is taking-whether
its price is generally
going up or down and
by how much.
Dividend and Yield:
Dividend is the stock's
annual cash dividend,
while Yield is the dividend
yield, which is obtained by
dividing the firm's annual
cash dividend by the
closing price of the stock
that day.
The Walt Disney Company (Public NYSE: DIS)
23.19
-0.36(-1.53%)
Real-time: 12:40PM EDT
Vol and Avg. Vol: Vol
represents the number,
or volume, of shares of
stock that were traded
so far during the day,
while Avg Vol
represents the average
volume on a typical day.
Open:
23.08
High:
23.25
Low:
22.95
Volume: 5.02M
Mkt Cap:
43.06B
52Wk High: 34.85
52Wk Low: 15.14
Avg. Vol:
17.60M
Dividend: 0.35
Yield:
1.51
Shares:
1.86B
Inst. Own: 67%
P/E: 12.59
EP/E: Beta: 1.11
EPS: 1.84
P/E, F P/E: P/E stands for price-earnings ratio (P/E ratio,
also called the "earning multiple"). The P/E ratio is the
stock's price divided by the firm on a per-share basis
over the previous 12 months. In effect, it states the
multiple that investors are willing to pay for one dollar of
earnings. High P/Es may result as investors are willing
to pay more for a dollar of earnings because they
believe that earnings will grow dramatically in the future.
Low P/Es are generally interpreted as an indication of
poor or risky future prospects. F P/E is the forward
price-earnings ratio, and uses estimated earnings over
next 12 months. If there is no estimate, it is not given.
EPS: The
earnings
per share.
Beta: A
measure of
the relationship between
an
investment's
returns and
the market's
returns and
the market's
returns. It will
be discussed
in detail later.
Shares, Inst. Own:
Shares represents number
of shares outstanding
while Inst. Own identifies
the percent of the shares
outstanding that are owned
by institutions such as
mutual funds and
institutional ownership.
110
Common Stock Price Quotes
The following is typical of what you would see if you looked
at www.google.com/finance.
The Walt Disney Company (Public NYSE: DIS)
23.19
Open:
23.08 Mkt Cap:
-0.36(-1.53%)
23.25 52Wk High:
Real-time: 12:40PM EDT High:
Low:
22.95 52Wk Low:
Volume: 5.02M Avg. Vol:
43.06B
34.85
15.14
17.60M
P/E:
EP/E:
Beta:
EPS:
12.59
1.11
1.84
Dividend:
Yield:
Shares:
Inst. Own:
0.35
1.51
1.86B
67%
The Walt Disney Company (Public NYSE: DIS)
23.19
-0.36(-1.53%)
Real-time: 12:40PM EDT
Stock Price and Change from Previous Day:
For Disney, the current price is $23.19, which
represents a decline of 1.53% or $0.36 from the
previous day‘s closing price.
111
112
Common Stock Price Quotes
The following is typical of what you would see if you looked
at www.google.com/finance.
Common Stock Price Quotes
The following is typical of what you would see if you looked
at www.google.com/finance.
The Walt Disney Company (Public NYSE: DIS)
23.19
Open:
23.08 Mkt Cap:
-0.36(-1.53%)
23.25 52Wk High:
Real-time: 12:40PM EDT High:
Low:
22.95 52Wk Low:
Volume: 5.02M Avg. Vol:
The Walt Disney Company (Public NYSE: DIS)
23.19
Open:
23.08 Mkt Cap:
-0.36(-1.53%)
23.25 52Wk High:
Real-time: 12:40PM EDT High:
Low:
22.95 52Wk Low:
Volume: 5.02M Avg. Vol:
43.06B
34.85
15.14
17.60M
P/E:
EP/E:
Beta:
EPS:
12.59
1.11
1.84
Dividend:
Yield:
Shares:
Inst. Own:
0.35
1.51
1.86B
67%
The Walt Disney Company (Public NYSE: DIS)
23.19
-0.36(-1.53%)
Real-time: 12:40PM EDT
Open:
High:
Low:
Volume:
Name and Symbol: These are used to identify
the stock. For example, the symbol for Disney is
"DIS." You can also use the stock's symbol when
using online systems to look up information on
the stock.
23.08
23.25
22.95
5.02M
43.06B
34.85
15.14
17.60M
Mkt Cap:
52Wk High:
52Wk Low:
Avg. Vol:
P/E:
EP/E:
Beta:
EPS:
12.59
1.11
1.84
Dividend:
Yield:
Shares:
Inst. Own:
0.35
1.51
1.86B
67%
43.06B
34.85
15.14
17.60M
Open, High and Low: On this day, Disney's
stock price opened the day at $23.08, and
ranged between a high of $23.25 and a low of
$22.95.
113
114
19
FIN 3701 Chapter 4 :Preferred and Common
Stocks
Common Stock Price Quotes
The following is typical of what you would see if you looked
at www.google.com/finance.
Common Stock Price Quotes
The following is typical of what you would see if you looked
at www.google.com/finance.
The Walt Disney Company (Public NYSE: DIS)
23.19
Open:
23.08 Mkt Cap:
-0.36(-1.53%)
23.25 52Wk High:
Real-time: 12:40PM EDT High:
Low:
22.95 52Wk Low:
Volume: 5.02M Avg. Vol:
The Walt Disney Company (Public NYSE: DIS)
23.19
Open:
23.08 Mkt Cap:
-0.36(-1.53%)
23.25 52Wk High:
Real-time: 12:40PM EDT High:
Low:
22.95 52Wk Low:
Volume: 5.02M Avg. Vol:
Open:
High:
Low:
Volume:
23.08
23.25
22.95
5.02M
43.06B
34.85
15.14
17.60M
Mkt Cap:
52Wk High:
52Wk Low:
Avg. Vol:
P/E:
EP/E:
Beta:
EPS:
12.59
1.11
1.84
Dividend:
Yield:
Shares:
Inst. Own:
0.35
1.51
1.86B
67%
43.06B
34.85
15.14
17.60M
Open:
High:
Low:
Volume:
23.08
23.25
22.95
5.02M
43.06B
34.85
15.14
17.60M
Mkt Cap:
52Wk High:
52Wk Low:
Avg. Vol:
P/E:
EP/E:
Beta:
EPS:
12.59
1.11
1.84
Dividend:
Yield:
Shares:
Inst. Own:
0.35
1.51
1.86B
67%
43.06B
34.85
15.14
17.60M
52Wk High and 52Wk Low: These are the highest
and lowest prices paid for the stock over the pas 52
weeks, excluding the latest day's trading. These
prices will give you a sense of the direction the
stock price is taking-whether its price is generally
going up or down and by how much.
Mkt Cap: Market Cap refers to the total value
of all the company's common stock outstanding.
115
Common Stock Price Quotes
The following is typical of what you would see if you looked
at www.google.com/finance.
The Walt Disney Company (Public NYSE: DIS)
23.19
Open:
23.08 Mkt Cap:
-0.36(-1.53%)
23.25 52Wk High:
Real-time: 12:40PM EDT High:
Low:
22.95 52Wk Low:
Volume: 5.02M Avg. Vol:
Open:
High:
Low:
Volume:
23.08
23.25
22.95
5.02M
43.06B
34.85
15.14
17.60M
Mkt Cap:
52Wk High:
52Wk Low:
Avg. Vol:
P/E:
EP/E:
Beta:
EPS:
12.59
1.11
1.84
Dividend:
Yield:
Shares:
Inst. Own:
0.35
1.51
1.86B
67%
43.06B
34.85
15.14
17.60M
Vol and Avg. Vol: Vol represents the number, or
volume, of shares of stock that were traded so far
during the day, while Avg Vol represents the
average volume on a typical day.
116
P/E:
EP/E:
Beta:
EPS:
12.59
1.11
1.84
Dividend:
Yield:
Shares:
Inst. Own:
0.35
1.51
1.86B
67%
P/E, F P/E: P/E stands for price-earnings ratio (P/E
ratio, also called the "earning multiple"). The P/E
ratio is the stock's price divided by the firm on a
per-share basis over the previous 12 months. In
effect, it states the multiple that investors are willing
to pay for one dollar of earnings. High P/Es may
result as investors are willing to pay more for a
dollar of earnings because they believe that
earnings will grow dramatically in the future. Low
P/Es are generally interpreted as an indication of
poor or risky future prospects. F P/E is the forward
price-earnings ratio, and uses estimated earnings
over next 12 months. If there is no estimate, it is not
given.
117
118
Common Stock Price Quotes
The following is typical of what you would see if you looked
at www.google.com/finance.
Common Stock Price Quotes
The following is typical of what you would see if you looked
at www.google.com/finance.
The Walt Disney Company (Public NYSE: DIS)
23.19
Open:
23.08 Mkt Cap:
-0.36(-1.53%)
23.25 52Wk High:
Real-time: 12:40PM EDT High:
Low:
22.95 52Wk Low:
Volume: 5.02M Avg. Vol:
The Walt Disney Company (Public NYSE: DIS)
23.19
Open:
23.08 Mkt Cap:
-0.36(-1.53%)
23.25 52Wk High:
Real-time: 12:40PM EDT High:
Low:
22.95 52Wk Low:
Volume: 5.02M Avg. Vol:
P/E:
EP/E:
Beta:
EPS:
43.06B
34.85
15.14
17.60M
12.59
1.11
1.84
P/E:
EP/E:
Beta:
EPS:
12.59
1.11
1.84
Dividend:
Yield:
Shares:
Inst. Own:
Dividend:
Yield:
Shares:
Inst. Own:
0.35
1.51
1.86B
67%
0.35
1.51
1.86B
67%
P/E:
EP/E:
Beta:
EPS:
Beta: A measure of the relationship between
an investment's returns and the market's returns
and the market's returns. It will be discussed
in detail later.
43.06B
34.85
15.14
17.60M
12.59
1.11
1.84
P/E:
EP/E:
Beta:
EPS:
12.59
1.11
1.84
Dividend:
Yield:
Shares:
Inst. Own:
Dividend:
Yield:
Shares:
Inst. Own:
0.35
1.51
1.86B
67%
0.35
1.51
1.86B
67%
EPS: The earnings per share.
119
120
20
FIN 3701 Chapter 4 :Preferred and Common
Stocks
Common Stock Price Quotes
The following is typical of what you would see if you looked
at www.google.com/finance.
Common Stock Price Quotes
The following is typical of what you would see if you looked
at www.google.com/finance.
The Walt Disney Company (Public NYSE: DIS)
23.19
Open:
23.08 Mkt Cap:
-0.36(-1.53%)
23.25 52Wk High:
Real-time: 12:40PM EDT High:
Low:
22.95 52Wk Low:
Volume: 5.02M Avg. Vol:
The Walt Disney Company (Public NYSE: DIS)
23.19
Open:
23.08 Mkt Cap:
-0.36(-1.53%)
23.25 52Wk High:
Real-time: 12:40PM EDT High:
Low:
22.95 52Wk Low:
Volume: 5.02M Avg. Vol:
P/E:
EP/E:
Beta:
EPS:
43.06B
34.85
15.14
17.60M
12.59
1.11
1.84
P/E:
EP/E:
Beta:
EPS:
12.59
1.11
1.84
Dividend:
Yield:
Shares:
Inst. Own:
Dividend:
Yield:
Shares:
Inst. Own:
0.35
1.51
1.86B
67%
0.35
1.51
1.86B
67%
P/E:
EP/E:
Beta:
EPS:
Dividend and Yield: Dividend is the stock's
annual cash dividend, while Yield is the dividend
yield, which is obtained by dividing the firm's
annual cash dividend by the closing price of the
stock that day.
43.06B
34.85
15.14
17.60M
12.59
1.11
1.84
P/E:
EP/E:
Beta:
EPS:
12.59
1.11
1.84
Dividend:
Yield:
Shares:
Inst. Own:
Dividend:
Yield:
Shares:
Inst. Own:
0.35
1.51
1.86B
67%
0.35
1.51
1.86B
67%
Shares, Inst. Own: Shares represents number
of shares outstanding while Inst. Own identifies
the percent of the shares outstanding that are
owned by institutions such as mutual funds and
institutional ownership.
121
122
Advantages of issuing a preferred
stock
• Preferred dividends do not have to be paid
(important during periods of financial
distress). Interest on debt must be paid.
• Preferred stockholders cannot force the
company into bankruptcy.
• Preferred shareholders do not share in
unusually high profits because the common
stockholders are the real owners of the
business.
Pros & Cons
123
124
Advantages of issuing a preferred
stock (cont.)
Advantages of issuing a preferred
stock (cont.)
• A growth company can generate better
earnings for its original owners by issuing
preferred stock having a fixed dividend rate
than by issuing common stock.
• Preferred stock issuance does not dilute the
ownership interest of common stockholders
in terms of earnings participation and voting
rights.
• The company does not have to collateralize
its assets as it may have to do if bonds are
issued.
• The debt to equity ratio is improved (lower
D/E)
Source: http://investments.academic.ru
125
126
21
FIN 3701 Chapter 4 :Preferred and Common
Stocks
Disadvantages of issuing a
preferred stock
To investors, a preferred stock
offers the followings:
• Preferred stock must offer a higher yield
than corporate bonds because it carries
greater risk (since preferred stock comes
after bonds in corporate liquidation).
• Preferred dividends are not tax deductible.
• Preferred stock has higher flotation costs
than bonds.
• Preferred stock usually provides a constant
return in the form of a fixed dividend
payment.
• Preferred stockholders come before common
stockholders in the event of corporate
bankruptcy.
Source:
http://www.teensguidetomoney.com
Source:
http://www.teensguidetomoney.com
127
Disadvantages to investors(cont.)
• Return is limited because of the fixed
dividend rate.
• Prices of preferred stock fluctuate more than
those of bonds because there is no maturity
date on the stock.
• Preferred stockholders cannot require the
company to pay dividends if the firm has
inadequate earnings.
128
Financing with common stock has the
following advantages (Think as CFO):
• The company is not required to pay fixed
charges such as interest or dividends.
• There is no repayment date or sinking fund
requirement.
• A common stock issue improves the
company’s credit rating compared to a bond
issue. For example, it improves the debtequity ratio.
Source: http://img.ehowcdn.com
Source: http://slimintrading.com
129
130
Debt vs. Equity
Financing with common stock has
disadvantages (cont.):
• Dividends are not tax deductible.
• Ownership interest is diluted. The additional
voting rights might vote to remove the current
ownership group from power.
• Earnings and dividends must be spread over
more shares outstanding.
• The floatation costs of a common
stock issue are higher than those for
preferred stock and debt financing.
Source: http://www.buzzle.com
131
Fixed Claim
Tax Deductible
High Priority in Financial Trouble
Fixed Maturity
No Management Control
Debt
Bank Debt
Commercial Paper
Corporate Bonds
Residual Claim
Not Tax Deductible
Lowest Priority in Financial Trouble
Infinite
Management Control
Hybrid Securities
Convertible Debt
Preferred Stock
Option-linked Bonds
Equity
Owner's Equity
Venture Capital
Common Stock
Warrants
132
22
FIN 3701 Chapter 4 :Preferred and Common
Stocks
Summary comparison of bonds and
common stock
Bonds
• Bondholders are
creditors.
• No voting rights exist.
• There is a maturity
date.
• Bondholders have prior
claims on profits and
assets in bankruptcy.
• Interest payments
represent fixed
charges.
Common Stock
• Stockholders are
owners.
• Voting rights exist.
• There is no maturity
date.
• Stockholders have
residual claims on
profits and assets in
bankruptcy.
• Dividend payments do
not constitute fixed
charges.
Summary comparison of bonds and
common stock (Cont.)
Common Stock
Bonds
• There is no tax
• Interest payments are
deductibility for dividend
deductible on the tax
payments.
return.
• The rate of return
• The rate of return
required by
required by bondholders
stockholders is typically
is typically lower than
greater than that
that required by
required by
stockholders.
bondholders.
133
Summary of Discounted Cash Flow Valuation of Bonds,
Preferred Stock, and Common Stock
135
Summary of Discounted Cash Flow Valuation of Bonds,
Preferred Stock, and Common Stock (Cont.)
137
134
Summary of Discounted Cash Flow Valuation of Bonds,
Preferred Stock, and Common Stock(cont.)
136
Summary of Discounted Cash Flow Valuation of Bonds,
Preferred Stock, and Common Stock (Cont.)
138
23
FIN 3701 Chapter 4 :Preferred and Common
Stocks
Selecting a long-term financing method:
An Introduction to Cost of Capital
Selecting a long-term financing method:
An Introduction to Cost of Capital (Cont.)
• The cost and risk of alternative financing
strategies.
• Future trends in market conditions and their
impact on future fund availability and interest
rates. For example, if interest rates are
expected to go up, the company will be
better off financing with long-term debt at the
currently lower interest rates. If stock prices
are high, equity issuance may be preferred
over debt.
• The current debt-to-equity ratio. A very high ratio,
for example, indicates financial risk, so additional
funds should come from equity sources.
139
Selecting a long-term financing method:
An Introduction to Cost of Capital (Cont.)
• The type and amount of collateral required
by long-term creditors.
• The company’s ability to change financing
strategy to adjust to changing economic
conditions. For example, a company subject
to large cyclical variations should have less
debt because it may not be able to meet
principal and interest at the low point of the
cycle. If earnings are unstable and/or there is
a highly competitive environment, more
emphasis should be given to equity financing.
141
• The maturity dates of present debt instruments.
For example, the company should avoid having all
debt come due at the same time; in an economic
downturn, it may not have adequate funds to meet
required debt payments.
• The restrictions in loan agreements. For instance,
a restriction may place a cap on the allowable
debt-equity ratio.
140
Selecting a long-term financing method
• The amount, nature, and stability of internally
generated funds. If earnings are stable, the
company will be better able to meet debt
obligations.
• The adequacy of present lines of credit to
meet current and future needs.
• The inflation rate, since debt is repaid in
cheaper dollars.
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Selecting a long-term financing method
Selecting a long-term financing method
• The earning power and liquidity position of
the company. For example, a liquid company
is able to meet debt payments.
• The nature and risk of assets. High-quality
assets in terms of cash realizability allow for
greater debt.
• The nature of the product line. A company,
for example, that faces obsolescence risk in
its product line (e.g., computers) should
refrain from overusing debt.
• The uncertainty of large expenditures.
If huge cash outlays may be required (e.g.,
for a lawsuit or the acquisition of another
company), additional debt capacity should
be available.
• The tax rate. For example, a higher tax rate
makes debt more attractive because interest
expense is tax deductible.
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144
24
FIN 3701 Chapter 4 :Preferred and Common
Stocks
Dividend Policy
Definition: Dividend is the distribution of value to
shareholders.
Dividend Policy: What happens to the value of the
firm as dividend is increased, holding everything else
(capital budgets, borrowing) constant. Thus, it is a
trade-off between retained earnings on one hand,
and distributing cash or securities on the other.
Dividend Policy and
Stock Split
Source: http://getpaydayloantoday.com
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145
Cash Dividend
Stock Dividend
Example: $.5 for every share you hold
Stock Repurchase2
Method
Regular, regular + “extra” , special
“an offer to purchase
some or all
Of shareholders’ shares
in a corporation.
The price offered is
usually at a premium
To the market price.”
in the open market
tender offer
direct negotiation with major shareholders
Dates:
Reasons
1/15
Declaration
Date
1/26
Ex-dividend
Date
1/30
Record
Date
2/25
Payment
Date
Alternative to "extra" or special dividend.
Example. A company just sold a division and
cannot use the proceeds for favorable
investments.
Only investors who hold the security prior to
the ex-divided date receive the dividend.
If management believes the stock is under-valued.
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148
Stock Split
Reference
• Example. (2-1 split), i.e., for every share you
own, now you own two.
• Argument for splits: To make stock "more
attractive" to investors?!
• Value of firm is not expected to change.
• Sheridan Titman, Arthur J. Keown, John D. Martin,
Financial Management: Principles and
Applications(12thed). New Jersey: Pearson &
Prentice Hall Inc, 2014.
Source: http://lh4.ggpht.com
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150
25
FIN 3701 Chapter 4 :Preferred and Common
Stocks
References for images
References for images
•
http://www.quotespin.com/54-warren-buffett/2/
•
•
http://bgr.com/2007/06/27/google-worth-600-a-share/
http://biomassmagazine.com/articles/5787/global-pellet-industry-on-therise-sustainability-key
•
http://i0.sinaimg.cn/cj/2014/0324/U10563P31DT20140324092425.jpg
•
•
http://www.palmbeachperfumes.com/images/Preferred%20Stock%201o
z%20Cologne%20Spray.jpg
http://previous.presstv.ir/photo/20130910/bavarsad20130910182556567
.jpg
•
•
http://images.computerwoche.de/images/computerwoche/bdb/1866369/
890.jpg
http://www.real-estate-washingtondc.com/Left-Image-WashingtonDC.jpg
•
http://www.universityofmakeup.com/wpcontent/uploads/Washington_DC-300x195.jpg
•
http://cebuhomeproperties.wordpress.com/
•
http://fineartamerica.com/featured/that-very-old-house-murphyelliott.html
•
http://www.monterose.com/wp-content/uploads/2014/04/Screen-Shot2014-04-30-at-9.00.55-AM.png
•
http://mrwilliamsburg.com/search-homes-for-sale/
•
http://2.imimg.com/data2/SE/XU/MY-3040106/real-estate-properties500x500.jpg
•
•
http://img.ehowcdn.com/article-newthumbnail/ehow/images/a05/1g/ut/board-directors-rights-800x800.jpg
http://iphone.theapplecollection.com/photos/14/med_black_and_gray_a
pple_logo.jpg
•
•
http://www.jobonomics.com/1/03/how-to-prepare-for-an-interview/
http://upload.wikimedia.org/wikipedia/commons/thumb/c/cd/Facade_of_
New_York_Stock_Exchange.jpg/1280pxFacade_of_New_York_Stock_Exchange.jpg
•
http://sombomull.blogspot.com/2012/04/calculation-of-intrinsicvalue.html
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References for images
•
http://latestlaptop.biz/dell-logo-png/
•
http://www.gemind.com.br/wp-content/uploads/2011/12/novo-logohp.png
http://investments.academic.ru/pictures/investments/img1966782_Sertifi
kat_privilegirovannoy_aktsii_American_Cities_Company.png
•
•
http://www.teensguidetomoney.com/investing/stock-types-common-preferred/
•
http://img.ehowcdn.com/article-newthumbnail/ehow/images/a06/7j/fv/comparing-preferred-stock-commonstock-800x800.jpg
•
•
http://slimintrading.com/agenda-dag-126/4635/
http://www.buzzle.com/articles/stock-investing/
•
•
http://getpaydayloantoday.com/wp-content/uploads/2014/05/payday-12703x420.jpg
http://lh4.ggpht.com/-FdchvxWLWw/TenS0PwOMdI/AAAAAAAAEF0/K02ACNq7kz8/stock%252520split%2
5255B1%25255D.jpg?imgmax=800
•
http://s2.hubimg.com/u/2091319_f520.jpg
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