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CFA一级Equity部分-Reading38课后习题及答案
Reading 38 Equity Valuation: Concepts and Basic Tools
1
An analyst estimates the intrinsic value of a stock to be in the range of €17.85 to €21.45. The current market price of the stock is €24.35. This stock is most likely:
A overvalued.
B undervalued.
C fairly valued.
SOLUTIONS:
1 A is correct. The current market price of the stock exceeds the upper bound of the analyst’s estimate of the intrinsic value of the stock.
2
An analyst determines the intrinsic value of an equity curity to be equal to $55. If the current price is $47, the equity is most likely:
A undervalued.
B fairly valued.
C overvalued.
SOLUTIONS:
2 A is correct. The market price is less than the estimated intrinsic, or fundamental, value.
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3
In ast-bad valuation models, the intrinsic value of a common share of stock is bad on the:
A estimated market value of the company’s asts.
B estimated market value of the company’s asts plus liabilities.
C estimated market value of the company’s as ts minus liabilities.
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SOLUTIONS:
3 C is correct. Ast-bad valuation models calculate the intrinsic value of equity by subtracting liabilities from the market value of asts.
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From Equity-Reading38-P365
数独的技巧Ast-bad valuation models. The models estimate intrinsic value of a common share from the estimated value of the asts of a corporation minus the estimated value of its liabilities and preferred shares. The estimated mar ket value of the asts is often determined by making adjustments to the book value (synonym: carrying value) of asts and liabilities.
4
Which of the following is most likely ud in a prent value model?
A Enterpri value.
B Price to free cash flow.
C Free cash flow to equity.
SOLUTIONS:
4 C is correct. FCFE can be ud in a form of prent value, or discounted cash flow, model. Both EV and price to free cash flow are forms of multiplier models.
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From Equity-Reading38-P365
➢Prent value models (synonym: discounted cash flow models). The models estimate the intrinsic value of a curity as the prent value of the future benefits expected to be received from the curity.
In prent value models, benefits are often defined in terms of cash expected to be distributed to shareholders (dividend discount models) or in terms of cash flows available to be distributed to shareholders after meeting capital expenditure and working capital needs (free-cash-flow-to-equity models). Many models fall within this category, ranging from the relatively simple to the very complex.
In Sections 4–8, we discuss in detail two of the simpler models, the Gordon (constant) growth model and the two-stage dividend discount models.
➢Multiplier models (synonym: market multiple models). The models are bad chiefly on share price multiples or enterpri value multiples.
⏹The former model estimates intrinsic value of a common share from a price multiple for some
fundamental variable, such as revenues, earnings, cash flows, or book value. Examples of the multiples include price to earnings (P/E, share price divided by earnings per share) and price to sales (P/S, share price divided by sales per share). The fundamental variable may be stated on a forward basis (e.g., forecasted EPS for the next year) or a trailing basis (e.g., EPS for the past year), as long as the usage is consistent across companies being examined. Price multiples are also ud to compare relative values. The u of the ratio of share price to EPS—that is, the P/E multiple—to judge relative value is an example of this approach to equity valuation.
⏹Enterpri value (EV) multiples have the form (Enterpri value)/(Value of a fundamental
variable). Two possible choices for the denominator are earnings before interest, taxes, depreciation,
and amortization (EBITDA) and total revenue. Enterpri value, the numerator, is a measure of a company’s total market value from which cash and short-term investments have been subtracted (becau an acquirer could u tho asts to pay for acquiring the company). An estimate of common share value can be calculated indirectly from the EV multiple; the value of liabilities and preferred shares can be subtracted from the EV to arrive at the value of common equity.
5
Book value is least likely to be considered when using:
A a multiplier model.
B an ast-bad valuation model.
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SOLUTIONS:
5 C is correct. Multiplier valuation models (in the form of P/B) and ast-bad valuation models (in the form of adjustments to book value) u book value, whereas prent value models typically discount future expected cash flows.
6
An analyst is attempting to calculate the intrinsic value of a company and has gathered the following company data: EBITDA, total market value, and market value of cash and short-term investments, liabilities,
and preferred shares. The analyst is least likely to u:
A a multiplier model.
B a discounted cash flow model.
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C an ast-bad valuation model.
SOLUTIONS:
6 B is correct. To u a discounted cash flow model, the analyst will require FCFE or dividend data. In addition, the analyst will need data to calculate an appropriate discount rate.
7
An analyst who bas the calculation of intrinsic value on dividend-paying capacity rather than expected dividends will most likely u the:
A dividend discount model.
B free cash flow to equity model.
快刀斩乱麻的意思C cash flow from operations model.
SOLUTIONS:
7 B is correct. The FCFE model assumes that dividend-paying capacity is reflected in FCFE.
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From Equity-Reading38-P369
the DDM expression for the intrinsic value of a share is Equation 1:
where
V0 = value of a share of stock today, at t = 0
Dt = expected dividend in year t, assumed to be paid at the end of the year
r = required rate of return on the stock玉蝴蝶柳永
we find the value for n holding periods is the prent value of the expected dividends for the n periods plus the prent value of the expected price in n periods:
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From Equity-Reading38-P371
In practice, many analysts prefer to u a free-cash-flow-to-equity (FCFE) valuation model. The analysts assume that dividend-paying capacity should be reflected in the cash flow estimates rather than expected dividends. FCFE is a measure of dividendpaying capacity. Analysts may also u FCFE valuation models for a non-dividendpaying stock.
The calculation of FCFE starts with the calculation of cash flow from operations (CFO). CFO is simply defined as net income plus non-cash expens minus investment in working capital. FCFE is a measure of cash flow generated in a period that is available for distribution to common shareholders. What does “available for distribution”mean? The entire CFO is not available for distrib
ution; the portion of the CFO needed for fixed capital investment (FCInv) during the period to maintain the value of the company as a going concern is not viewed as available for distribution to common shareholders. Net amounts borrowed (borrowings minus repayments) are considered to be available for distribution to common shareholders. Thus, FCFE can be expresd as
FCFE = CFO –FCInv + Net borrowing
The information needed to calculate historical FCFE is available from a company’s statement of cash flows and financial disclosures. Frequently, under the assumption that management is acting in the interest of maintaining the value of the company as a going concern, reported capital expenditure is taken to reprent FCInv. Analysts must make projections of financials to forecast future FCFE. Valuation obtained by using FCFE involves discounting expected future FCFE by the required rate of return on equity; the expression parallels Equation 1:
8
An investor expects to purcha shares of common stock today and ll them after two years. The investor has estimated dividends for the next two years, D1 and D2, and the lling price of the stock two years from now, P2. According to the dividend discount model, the intrinsic value of the stock tod
ay is the prent value of:
A next year’s dividend, D1.
