5-6 Stocks Stock Market Book Value- Net worth of the firm according to the balance sheet Liquidation Value - Net proceeds that would be realized by selling the firms assets and paying off its creditors Market value balance sheet- financial statement that uses market value of assets and liabilities Irwin/McGraw-Hill CThe McGraw-Hill Companies, Inc, 2001
©The McGraw-Hill Companies, Inc.,2001 5- 6 Irwin/McGraw-Hill Stocks & Stock Market Book Value - Net worth of the firm according to the balance sheet. Liquidation Value - Net proceeds that would be realized by selling the firm’s assets and paying off its creditors. Market Value Balance Sheet - Financial statement that uses market value of assets and liabilities
5-7 Valuing Common Stocks Expected Return The percentage yield that an investor forecasts from a specific investment over a set period of time. Sometimes called the holding period return(HPR) Div,+p-p Expected Return =r 0 Irwin/McGraw-Hill CThe McGraw-Hill Commpanies, Inc, 2001
©The McGraw-Hill Companies, Inc.,2001 5- 7 Irwin/McGraw-Hill Valuing Common Stocks Expected Return - The percentage yield that an investor forecasts from a specific investment over a set period of time. Sometimes called the holding period return (HPR). Expected Return = = + − r Div P P P 1 1 0 0
5-8 Valuing Common Stocks The formula can be broken into two parts Dividend Yield Capital Appreciation Expected Return =r= ii P-P + P 0 Irwin/McGraw-Hill CThe McGraw-Hill Companies, Inc, 2001
©The McGraw-Hill Companies, Inc.,2001 5- 8 Irwin/McGraw-Hill Valuing Common Stocks The formula can be broken into two parts. Dividend Yield + Capital Appreciation Expected Return = = + − r Div P P P P 1 0 1 0 0