Chapter 9: Stock Valuation

Chapter 9: Stock Valuation 1. Present Value of Common Stock P₀ = Σₜ₌₁^∞ [Divₜ / (1 + R)ᵗ] The price of a company’s common stock equals the present value of all future expected dividends. 2. Valuation of Different Types of Stocks Zero Growth: P₀ = Div / R Constant Growth: P₀ = Div / (R − g) (where Div is the dividend at the end of Year 1) Two-Stage Growth: Calculate present values stage by stage; see Example 9-3 in the textbook for details. 3. Growth Rate g g = Retention Ratio (b) × Return on Equity (ROE) 4. Discount Rate R R = Div / P₀ + g. The total return R consists of two components: Div / P₀ is the dividend yield, and g is the capital gains yield.

CPA Financial Management — 12-2: Valuation of Financial Instruments

(2) Stock Value: (3) When g is constant and rₛ > g, and n → ∞, the above formula simplifies to: [2019 Multiple-Choice Question] Companies A and B have entered a stable growth phase. Their stock information is as follows: Which of the following statements regarding investment in Stocks A and B is correct? A. Stocks A and B have the same expected dividend. B. Stocks A and B have the same dividend yield. C. Stocks A and B have the same expected capital gain. D. Stocks A and B have the same capital gains yield. [Solution] P₀ = D₁ / (r − g) Dividend D₁ for Stock A = 30 × (10% − 6%) = 1.2 Dividend D₁ for Stock B = 40 × (14% − 10%) = 1.6 Dividend yield for Stock A = 1.2 / 30 = 4% Dividend yield for Stock B = 1.6 / 40 = 4% → Option B is correct. Expected price of Stock A = 30 × (1 + 6%) = 31.8 Expected capital gain = 31.8 − 30 = 1.8 Expected capital gains yield = 1.8 / 30 = 6% Expected price of Stock B = 40 × (1 + 10%) = 44 Expected capital gain = 44 − 40 = 4 Expected capital gains yield = 4 / 40 = 10% [Answer] B [2022 Multiple-Choice Question] Company A pays ordinary dividends semiannually. Dividends grow continuously at 3% per half-year. The most recent dividend paid for the first half of the year was ¥1 per share. The annual required rate of return on Company A’s stock—considered to carry equivalent risk—is 10.25%. What is the current value per share of Company A’s stock? A. 13.73 B. 24.96 C. 48.47 D. 51.5 [2018 Calculation Question] Company A is a listed company that recently paid last year’s cash dividend of ¥2.2 per share. Its current market price is ¥50 per share. Securities analysts forecast that Company A’s future dividend growth rate will be 6%, and the required rate of return on investments of equivalent risk is 10%. There are two options traded in the market with Company A’s stock as the underlying asset: a European call option and a European put option. Each call option entitles the holder to purchase one share of stock; each put option entitles the holder to sell one share of stock. The call option price is ¥5 per contract, and the put option price is ¥3 per contract. Both options have an exercise price of ¥50 and a maturity of one year. Investors Xiao Wang and Xiao Zhang both believe the market has undervalued Company A’s stock and expect its price to revert to its intrinsic value in one year. Each invests ¥53,000. Xiao Wang’s investment strategy is to buy 1,000 shares of Company A’s stock and simultaneously purchase 1,000 put options on Company A’s stock.

Advansix, Inc. Book Value Per Share – HAN:960

Oct 12, 2026

Advansix Inc. provided its book value per share data on the Hannover Stock Exchange under ticker HAN:960. Trading was inactive with no trades recorded during the market closure.

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