4. Sudbury Industries expects FCFF in the coming year of 400 million Canadian dollars （$）， and expects FCFF to grow forever at a rate of 3 percent. The company maintains an all-equity capital structure， and Sudbury’s required rate of return on equity is 8 percent. Sudbury Industries has 100 million outstanding common shares. Sudbury’s common shares are currently trading in the market for $80 per share. Using the Constant-Growth FCFF Valuation Model， Sudbury’s stock is： A. Fairly-valued. B. Over-valued C. Under-Valued 卡普兰教授：Tim Smaby 解析： “The correct answer is A. Based on a free cash flow valuation model， Sudbury Industries shares appear to be fairly valued. Since Sudbury is an all-equity firm， WACC is the same as the required return on equity of 8%. The firm value of Sudbury Industries is the present value of FCFF discounted by using WACC. Since FCFF should grow at a constant 3 percent rate， the result is： Firm value = FCFF1 / WACC？g = 400 million / 0.08？0.03 = 400 million / 0.05 = $8，000 million Since the firm has no debt， equity value is equal to the value of the firm. Dividing the $8，000 million equity value by the number of outstanding shares gives the estimated value per share： V0 = $8，000 million / 100 million shares = $80.00 per share 5. Excerpt from item set Financial information on a company has just been published including the following： Net income $240 million Cost of equity 12% Dividend payout rate （paid at year end） 60% Common stock shares in issue 20 million Dividends and free cash flows will increase a growth rate that steadily drops from 14% to 5% over the next four years， then will increase at 5% thereafter. The intrinsic value per share using dividend-based valuation techniques is closest to： A. $121 B. $127 C. $145 高顿财经研究院主任 Feng 解析： “The H-model is frequently required in Level II item sets on dividend or free cash flow valuation. The model itself can be written as V0 = D0 ÷ （r – gL） x [（1 + gL） + （H x （gS – gL））] where gS and gL are the short-term and long-term growth rates respectively， and H is the “half life” of the drop in growth. For this question， the calculation is： dividend D0 = $240m x 0.6 ÷ 20m = $7.20 per share. V0 = $7.20 ÷ （0.12 – 0.05） x [1.05 + 2 x （0.14 – 0.05）] = $126.51， answer B. However， there is a neat shortcut for remembering the formula. Sketch a graph of the growth rate against time： a line decreasing from short-term gS down to long-term gL over 2H years， then horizontal at level gL. Consider the area under the graph in two parts： the ‘constant growth’ part， and the triangle. If you look at the formula， the ‘constant growth’ component uses the first part of the square bracket， i.e. D0 ÷ （r – gL） x [（1 + gL） …]， which is your familiar D1 ÷ （r – gL）. For the triangle， what is its area？ Half base x height = 0.5 x 2H x （gS – gL） = H x （gS – gL）. This is the second part of the square bracket. Hence the H-model can be rewritten as V0 = D0 ÷ （r – gL） x [（1 + gL） + triangle].” CFA三级试题： 6.A German portfolio manager entered a 3-month forward contract with a U.S. bank to deliver $10，000，000 for euros at a forward rate of 0.8135/$. One month into the contract， the spot rate is 0.8170/$， the euro rate is 3.5%， and the U.S. rate is 4.0%. Determine the value and direction of any credit risk. 卡普兰教授：Tim Smaby 解析： “The German manager （short position） has contracted with a U.S. bank to sell dollars at 0.8135， and the dollar has strengthened to 0.8170. The manager would be better off in the spot market than under the contract， so the bank faces the credit risk （the manager could default）. From the perspective of the U.S. bank （the long position）， the amount of the credit risk is： Vbank （long） = 8，170，000 / （1.04）2/12 ？ 8，135，000 / （1.035）2/12 = 28，278 （The positive sign indicates the bank faces the credit risk that the German manager might default.）” 7. Within the ‘Option Strategies’ section Option Strike Premium Call 1X1 = 20 c1 = 6 Call 2X2 = 30 c2 = 4 Put 1X1 = 20 p1 = 0.604 Put 2X2 = 30 p2 = 8.001 Risk-free rate continuously compounded： 4% annual Option expiry： 6 months Using the above data for a box spread， calculate what arbitrage profit can be achieved at the end of 6 months. 高顿财经研究院主任 Feng 解析： |
 |