Module 10 - Valuations

Question 1

Formula used to value shares

Answer 1

P = D (1+g) / (r-g)

Question 2

What does the top line of the equation used to value shares represent

Answer 2

next years dividend

Question 3

How are ordinary shares values

Answer 3

by taking the present value of the stream of future cash flows

Question 4

value of irredeemable preference shares

Answer 4

P = S/r

Question 5

Value of redeemable preference shares

Answer 5

Use NPV to calculate the present value of the returns generated using the discount factor of the required rate of return (including redemption value)

Question 6

Value of bonds

Answer 6

the same process as preference shares