ch03

(2) a firm: total assets minus liabilities and preferred stock as listed on the balance sheet.
3-6
What is Value?
Market value （市场价值） 市场价值an asset trades. Intrinsic value（内在价值） 内在价值） represents the price a security “ought to have” based on all factors bearing on valuation.
I kd V
3-15
= $1,000 ( 8%) = $80 $80. = 10% 10%. = I / kd [Reduced Form] = $80 / 10% = $800 $800.
Different Types of Bonds
A non-zero coupon-paying bond（非零息债券 noncoupon） is a coupon paying bond with a finite life.
V=
3-18
MV
(1 + kd )n
= MV (PVIFk
, n) d
ZeroZero-Coupon Bond Example
Bond Z has a $1,000 face value and a 30 year life. The appropriate discount rate is 10%. What is the value of the zero-coupon bond? V = $1,000 (PVIF10%, 30) = $1,000 (.057) = $57.00
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Semiannual Compounding
A non-zero coupon bond adjusted for nonsemiannual compounding.
V =(1 + k =Σ
3-21
I/2
2 d/2 )1
+(1 + k
)t
I/2
2 d/2 )2
+ ... + + k (1 MV
3-3
The Valuation of LongLong-Term Securities
Distinctions Among Valuation Concepts Bond Valuation Preferred Stock Valuation Common Stock Valuation Rates of Return (or Yields)
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The valuation of bond
Bond Value = PV of coupons + PV of par That means: BV = PV of annuity + PV of lump sum
3-12
Valuing a Premium Bond with Annual Coupons
The maturity value (MV，到期值) [or MV， face value，面值] of a bond is the ， stated value. In the case of a U.S. bond, the face value is usually $1,000.
3-10
Important Bond Terms
3-17
[Table II] II]
Different Types of Bonds
A zero coupon bond（零息债券） is a 零息债券）
bond that pays no interest but sells at a deep discount from its face value; it provides compensation to investors in the form of price appreciation.
Suppose you are looking at a bond that has a 10% annual coupon and a face value of $1000. There are 20 years to maturity and the yield to maturity is 8%. What is the price of this bond?
I / 2 + MV
/2 ) 2*n d 2
2*n n
t=1
I/2
(1 + kd /2 2
+
(1 + kd /2 ) 2*n 2
= I/2 (PVIFAkd /2 ,2*n) + MV (PVIFkd /2 ,2*n) 2 2 n 2 n
Semiannual Coupon Bond Example
3-4
What is Value?
Liquidation value （清算价值） 清算价值）
represents the amount of money that could be realized if an asset or group of assets is sold separately from its operating organization. GoingGoing-concern value （持续经营价值） 持续经营价值） represents the amount a firm could be sold for as a continuing operating business.
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Klingon Corporation
KLINGON CORPORATION Balance Sheets Market Value versus Book Value Book Assets NWC NFA $ 400 700 1,100 Market Book Market Liabilities and Shareholders’ Equity $ 600 LTD 1,000 SE 1,600 $ 500 600 1,100 $ 500 1,100 1,600
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Semiannual Compounding
Most bonds in the U.S. pay interest twice a year (1/2 of the annual coupon).
Adjustments needed: (1) Divide kd by 2 (2) Multiply n by 2 (3) Divide I by 2
The bond’s coupon rate （票面利率）is 票面利率） the stated rate of interest; the annual interest payment divided by the bond’s face value. The discount rate（折现率） 折现率） (capitalization rate) is dependent on the risk of the bond and is composed of the risk-free rate plus a premium for risk.
Chapter 3
The Valuation of Long-Term LongSecurities
长期证券的估价
3-1
3-2
After studying Chapter 3, you should be able to:
1. 2. 3. 4.
Distinguish among the various terms used to express value. Value bonds, preferred stocks, and common stocks. Calculate the rates of return (or yields) of different types of long-term securities. List and explain a number of observations regarding the behavior of bond prices.
V=
I
(1 + kd)1
∞
+
I
(1 + kd)2
+ ... +
I
(1 + kd)∞
,∞) d
=Σ
3-14
I
(1 + kd)t
or
t=1
I (PVIFA k
V = I / kd
[Reduced Form]
Perpetual Bond Example
Bond P has a $1,000 face value and provides an 8% annual coupon. The appropriate discount rate is 10%. What is the value of the perpetual bond bond?
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Bond Valuation（债券价值） 债券价值）
Important Terms Types of Bonds Valuation of Bonds Handling Semiannual Compounding
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Important Bond Terms
A bond is a long-term debt instrument issued by a corporation or government.
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[Table II] II]
Exercise P:89 ,1,2
Gonzalez Electric Company has outstanding a 10% bond issue with a face value of $1000 per bond and three years to maturity. Interest is payable annually. The bonds are privately held by Suresafe Fire Insurance Company. Suresafe wishes to sell the bonds, and is negotiating with another party. It estimates that, in current market conditions, the bonds should provide a return of 14%. What price per bond should Suresafe be able to realize on the sale? What would be the price per bond in Problem 1 if interest payments were made semiannually?