Class notes
MAC3702 VALUATION NOTES
- Course
- MAC3702
- Institution
- University Of South Africa (Unisa)
MAC3702 VALUATION NOTES
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Valuations NotesDEBT
Non-redeemable Debentures, bonds and preference shares
(non-redeemable bonds or notes.)
VALUE =
COUPON PMT
REQUIRED RATE
Redeemable debentures and bonds
VALUE =PV
Where: PMT =face value X coupon rate
I= required rate/similar market yield
N=period until redemption
FV=Face value
m
er as
Cumulative preference shares
co
eH w
VALUE =
COUPON PMT
o.
REQUIRED RATE
rs e
ou urc
PV may be required if there’s a break in the payment of dividends
Non-Cumulative preference shares
o
aC s
v i y re
COUPON PMT
REQUIRED RATE
NO PV as not cumulative.
ed d
ar stu
ORDINARY EQUITY
1.Dividend Discount Model.
sh is
VALUE =
Th
D 1 ( NEXT DIVIDEND ) i . e ¿
K ( COST OF EQUITY ) −G(GROWTH RATE)
*Dividend cover means the number of times profit should cover the dividends
e.g. If dividend cover is 2, divide profit by 2 to determine dividend
Limitations
The model is limited in the following respects:
■ It assumes that growth is constant.
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