Discount a growing perpetuity, starting yr 3 - answer✔PV = (CF^3 x 1/(r-g)) x DF^2
Enterprise Value - answer✔Mve + Mvd
EBITDA valuation - answer✔EBITDA multiple x EBITDA
EBITDA multiple - answer✔EV / EBITDA
Value of equity using Enterprise value - answer✔Enterprise value - mv of debt = VE
Unsystematic risk - answer✔Company specific risk
Systematic risk - answer✔Marketing risk - risk of investing itself, that cannot be diversified
What do M&M say about dividend policy? - answer✔Div policy should be irrelevant to share price/
shouldn't impact share price. However, M&M are assuming we are in perfect market with no tax.
Residual div policy - all residual income should be distributed as dividends. Erratic div amounts yr on yr
The traditional view on div policy - answer✔Investors value the certainty of cash in hand from div -
therefore value dividend paying co more highly than a non-div paying company
Clientele effect - div policy - answer✔Investors like the current policy (for income and tax reasons),
therefore they may sell their shares if the policy changes.
Signalling effect - answer✔Investors see changes in dividend policy as evidence of underlying
performance of company. Therefore change in policy - sell their shares - reduction in value of shares
Value of a right - answer✔TERP - Offer price
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