Stocks (Equity)—Characteristics and Valuation (Chapter 7)

•
DQQXLW\SDLGWZLFHD\HDUIRUWKHQH[WILYH\HDUV
,QWHUHVW5DWH5LVNRQD%RQG²LQWHUHVWUDWHVFKDQJHFRQVWDQWO\LQWKHILQDQFLDOPDUNHWVWKXV
LQYHVWRUVIDFHLQWHUHVWUDWHULVNFRQWLQXRXVO\ZLWKWKHLULQYHVWPHQWV,QWHUHVWUDWHFKDQJHVDIIHFW
LQYHVWRUVZKRKROGERQGVLQWZRZD\V²ZKHQLQWHUHVWUDWHVFKDQJHWKHPDUNHWYDOXHRIWKH
ERQGFKDQJHVDQGVRGRHVWKHUDWHDWZKLFKWKHLQWHUHVWUHFHLYHGE\LQYHVWRUVFDQEHUHLQYHVWHG
7KHIROORZLQJWDEOHVKRZVZKDWZRXOGKDSSHQWRWKHYDOXHRIWKHERQGZHH[DPLQHGHDUOLHU
LQWHUHVWSD\PHQWDQQXDOO\DQGILYH\HDUVXQWLOPDWXULW\LILQWHUHVWUDWHVLPPHGLDWHO\DIWHUWKHERQG
ZDVSXUFKDVHGDUHDVIROORZV
0DUNHW5DWHUG
%RQG9DOXH9G
±FXUUHQWPDUNHWYDOXH
1RWLFHWKDWWKHYDOXHRIWKHERQGLVLQYHUVHO\UHODWHGWRWKHPDUNHWUDWH²LIWKHUDWHLQFUHDVHVWKH
YDOXHGHFUHDVHV7KHUHDVRQIRUWKLVLVEHFDXVHLQYHVWRUVUHFHLYHDIL[HGDPRXQWRIIXWXUHFDVKIORZV
LQWHUHVWZKHQWKH\EX\ERQGVOLNHWKHRQHZHDUHH[DPLQLQJKHUH,IWKHPDUNHWUDWHVFKDQJHWKH
ERQG¶VYDOXHFKDQJHVVXFKWKDWLIDQLQYHVWRUSXUFKDVHVWKHERQGDIWHUWKHUDWHFKDQJHKHRUVKHZLOO
HDUQD<70HTXDOWRWKHPDUNHWUDWHRIUHWXUQ&RQVLGHUZKDWZRXOGKDSSHQLI\RXSXUFKDVHGWKH
ERQGZKHQWKHPDUNHWUDWHZDVSHUFHQWWKXV\RXSDLG$VVRRQDVWKHSXUFKDVHZDV
FRPSOHWHGWKHPDUNHWUDWHMXPSHGWRSHUFHQWVR\RXGHFLGHWRVHOOWKHERQGVRWKDW\RXFDQ
LQYHVWLQDGLIIHUHQWERQGWKDWHDUQVSHUFHQWUDWKHUWKDQSHUFHQW%HFDXVH\RXSDLGIRU
WKHERQGDQGRQO\KHOGLWIRUDVKRUWWLPH\RXPLJKWWKLQN\RXFDQVHOOLWIRUWKHVDPHSULFH:KRGR
\RXWKLQNZRXOGEHZLOOLQJWREX\WKHERQG"7KHDQVZHULV12%2'<EHFDXVHLQYHVWRUVFDQQRZ
HDUQSHUFHQWRQVLPLODUULVNERQGVDQGLIWKH\SXUFKDVHG\RXUERQGIRUWKH\ZRXOGRQO\
HDUQSHUFHQW$VDUHVXOW\RXPXVWDGMXVWWKHSULFHRI\RXUERQGVRWKDWLWQRZJHQHUDWHVD
SHUFHQWUHWXUQ²WKDWLV\RXZRXOGKDYHWRGURSWKHSULFHWR%HFDXVHWKHSULFHRIWKHERQG
FKDQJHVHDFKWLPHPDUNHWLQWHUHVWUDWHVFKDQJHZHKDYHZKDWLVWHUPHGLQWHUHVWUDWHSULFHULVN
*LYHQWKHSUHFHGLQJGLVFXVVLRQ\RXPLJKWWKLQNWKDWZKHQLQWHUHVWUDWHVLQFUHDVHERQGKROGHUVDUH
XQKDSS\EHFDXVHWKHSULFHVRIWKHLUERQGVGHFUHDVH%XWDOWKRXJKWKHSULFHRIWKHERQGLQRXU
H[DPSOHZRXOGGURSWRLILQWHUHVWUDWHVLQFUHDVHGIURPSHUFHQWWRSHUFHQW\RXZRXOG
QRZEHDEOHWRLQYHVWWKHLQWHUHVWSD\PHQWUHFHLYHGIURPWKHERQGHYHU\\HDUDWSHUFHQW
FRPSRXQGHGDQQXDOO\UDWKHUWKDQSHUFHQW,QWKLVFDVHZHKDYHZKDWLVWHUPHGLQWHUHVWUDWH
UHLQYHVWPHQWULVN$QGDV\RXFDQWHOOLWVHIIHFWLVRSSRVLWHWKDWRILQWHUHVWUDWHSULFHULVN7KDWLV
LIPDUNHWLQWHUHVWUDWHVLQFUHDVHGHFUHDVHWKHSULFHVRIERQGVGHFUHDVHLQFUHDVHEXWLQYHVWRUVDUH
DEOHWRUHLQYHVWDQ\LQFRPHUHFHLYHGIURPWKHERQGVDWWKHKLJKHUORZHUUDWHV
6WRFNV(TXLW\²&KDUDFWHULVWLFVDQG9DOXDWLRQ&KDSWHU
• 3UHIHUUHG6WRFN²JHQHUDOO\SD\VDFRQVWDQWGLYLGHQGVLPLODUWRDERQGEXWWKHILUPFDQQRWEHIRUFHG
9DOXDWLRQ&RQFHSWV²
•
•
LQWREDQNUXSWF\LIWKHGLYLGHQGLVQRWSDLGZKLFKLVVLPLODUWRFRPPRQVWRFN²RIWHQFDOOHGDK\EULG
VHFXULW\
o 3DUYDOXH²WKHDPRXQWWKDWLVSDLGWRVWRFNKROGHUVLQWKHHYHQWWKHFRPSDQ\LVOLTXLGDWHG
DVVXPLQJWKDWWKHIXQGVDUHDYDLODEOHDQGWKHGLYLGHQGJHQHUDOO\LVVWDWHGDVDSHUFHQWRIWKH
SDUYDOXH
o &XPXODWLYHGLYLGHQGV²DIHDWXUHWKDWUHTXLUHVWKHILUPWRSD\SUHIHUUHGGLYLGHQGVWKDWZHUHQRW
SDLGLQSUHYLRXVSHULRGVEHIRUHDQ\FRPPRQVWRFNGLYLGHQGVDUHSDLG
o 0DWXULW\²GRHVQRWKDYHDVSHFLILFPDWXULW\
o 3ULRULW\WRDVVHWVDQGHDUQLQJV²SUHIHUUHGGLYLGHQGVDUHSDLGDIWHULQWHUHVWRQGHEWLVSDLGEXW
EHIRUHFRPPRQVWRFNGLYLGHQGVDUHSDLGLQWKHHYHQWRIOLTXLGDWLRQRIWKHFRPSDQ\SUHIHUUHG
VWRFNKROGHUVDUHSDLGDIWHUGHEWREOLJDWLRQVDUHUHSDLGEXWEHIRUHFRPPRQVWRFNKROGHUVUHFHLYH
DQ\OLTXLGDWLRQSURFHHGV
o &RQWURORIWKHILUP²SUHIHUUHGVWRFNKROGHUVGRQRWKDYLQJYRWLQJULJKWVWKHH[FHSWLRQLVZKHQ
SUHIHUUHGGLYLGHQGVDUHQRWSDLGIRUDSDUWLFXODUH[WHQGHGSHULRGRIWLPH
o &RQYHUWLELOLW\²OLNHERQGVSUHIHUUHGVWRFNFDQFRQWDLQDSURYLVLRQWKDWSHUPLWVLQYHVWRUVWR
FRQYHUWLQWRWKHFRPPRQVWRFNRIWKHILUP
o 2WKHUSURYLVLRQV²FDOOSUHPLXP²WKHDPRXQWWKDWWKHILUPKDVWRSD\LILWFDOOVLQSUHIHUUHG
VWRFNVLQNLQJIXQG²XVHGWRUHSXUFKDVHDQGUHWLUHVRPHSUHIHUUHGVWRFNDWSHULRGLF
LQWHUYDOVDQGSDUWLFLSDWLQJSUHIHUUHG²UHFHLYHVDVWDWHGPLQLPXPGLYLGHQGDQGWKHQ
SDUWLFLSDWHVZLWKFRPPRQVWRFNKROGHUVLQWKHGLVWULEXWLRQRIHDUQLQJVLQH[FHVVRIVRPHVWDWHG
DPRXQW
&RPPRQ6WRFN²FRPPRQVWRFNKROGHUVDUHWKH³RZQHUV´RIWKHILUP
o 3DUYDOXH²FRPPRQVWRFNGRHVQRWKDYHWRKDYHDSDUYDOXHWKHSDUYDOXHRIFRPPRQVWRFN
UHIHUVWRWKHPLQLPXPDPRXQWIRUZKLFKDVWRFNKROGHULVSHUVRQDOO\OLDEOHZKLFKPHDQVWKDW
LQYHVWRUVZKRSXUFKDVHWKHVWRFNIRUPRUHWKDQLWVSDUYDOXHFDQQRWORVHDQ\PRUHPRQH\WKDQ
ZKDWWKH\LQYHVWLQWKHVWRFN
o 'LYLGHQGV²GLYLGHQGVDUHQRWJXDUDQWHHGWKH\GRQRWKDYHWREHSDLG+RZHYHUDQ\LQFRPH
OHIWDIWHUSD\LQJLQWHUHVWRQGHEWDQGSUHIHUUHGVWRFNGLYLGHQGV³EHORQJV´WRFRPPRQ
VWRFNKROGHUVDQGWKLVDPRXQWLVSURYLGHGWRVWRFNKROGHUVDVGLYLGHQGSD\PHQWVUHLQYHVWPHQWLQ
WKHILUPWKURXJKUHWDLQHGHDUQLQJVRUERWK
o 0DWXULW\²WKHUHLVQRVSHFLILFPDWXULW\
o 3ULRULW\WRDVVHWVDQGHDUQLQJV²FRPPRQVWRFNKROGHUVDUH³ODVWLQOLQH´ZKHQLWFRPHVWR
GLVWULEXWLRQRIHDUQLQJVDQGOLTXLGDWLRQSURFHHGVFRPPRQVWRFNKROGHUVDUHSDLGDIWHUGHEW
KROGHUVDQGSUHIHUUHGVWRFNKROGHUV
o &RQWURORIWKHILUPYRWLQJULJKWV²FRPPRQVWRFNKROGHUVKDYHWKHULJKWWRYRWHWRHOHFWWKH
ILUP¶VERDUGRIGLUHFWRUVZKRWKHQDSSRLQWWKHRIILFHUV0DQ\LQYHVWRUVDVVLJQWKHLUYRWLQJ
SULYLOHJHVWRDQRWKHUSHUVRQWKLVLVFDOOHGDSUR[\
o 3UHHPSWLYHULJKW²VRPHFRPPRQVWRFNDOORZVH[LVWLQJVWRFNKROGHUVWKHULJKWWRSXUFKDVHQHZ
LVVXHVRIVWRFNLQWKHSURSRUWLRQWKDWWKH\RZQSULRUWRDQHZLVVXHWKLVSHUPLWVVWRFNKROGHUVWR
PDLQWDLQWKHVDPHSHUFHQWDJHFRQWURORIWKHILUPDIWHUWKHVWRFNLVLVVXHG
o 7\SHVRIFRPPRQVWRFN²PDQ\ILUPVLVVXH³FODVVLILHG´FRPPRQVWRFNVXFKDV&ODVV$&ODVV
%DQGVRIRUWKLQPDQ\FDVHVRQHFODVVLVYRWLQJVWRFNDQGDQRWKHUFODVVLVQRQYRWLQJ
(TXLW\,QVWUXPHQWVLQ,QWHUQDWLRQDO0DUNHWV
9DOXDWLRQ&RQFHSWV²
o $PHULFDQ'HSRVLWRU\5HFHLSWV$'5²FHUWLILFDWHVFUHDWHGE\ILQDQFLDORUJDQL]DWLRQVWKDW
UHSUHVHQWRZQHUVKLSLQIRUHLJQVWRFNLQYHVWRUVRZQWKHFHUWLILFDWHVQRWWKHVWRFNWKHYDOXHRI
WKHFHUWLILFDWHFKDQJHVDVWKHYDOXHRIWKHXQGHUO\LQJVWRFNFKDQJHV
o )RUHLJQ(TXLW\6WRFN
ƒ (XURVWRFN²VWRFNWUDGHGLQFRXQWULHVRWKHUWKDQWKHKRPHFRXQWU\RIWKHFRPSDQ\
ƒ <DQNHHVWRFN²VWRFNRIDIRUHLJQFRPSDQ\WKDWLVWUDGHGLQWKH8QLWHG6WDWHV
•
6WRFN9DOXDWLRQ²'LYLGHQG'LVFRXQW0RGHO''0²ZKHQZHYDOXHVWRFNZHXVHWKHVDPH
DSSURDFKGHVFULEHGIRUYDOXLQJERQGV²WKDWLVILQGWKHSUHVHQWYDOXHRIDOOWKHFDVKIORZVH[SHFWHG
WREHUHFHLYHGIURPWKHVWRFNLQWKHIXWXUH7KXVLQHTXDWLRQIRUPWKHYDOXHRIDVKDUHRIVWRFNFDQ
EHZULWWHQ
9DOXHRI
VWRFN
= 9V = 3Ö = 39RI H[SHFWHGIXWXUHGLYLGHQGV
=
Ö
'
+ UV +
Ö
'
+ UV ++
Ö
'
∞
+ UV ∞
Ö UHSUHVHQWVWKHGLYLGHQGH[SHFWHGLQ3HULRGWDQGUVLVWKHUDWHRIUHWXUQLQYHVWRUVUHTXLUHWR
ZKHUH '
W
LQYHVWLQVLPLODUULVNHTXLW\LQYHVWPHQWV:HXVXDOO\DSSO\WKHDERYHHTXDWLRQWRWKUHHGLIIHUHQW
JHQHUDOVLWXDWLRQVILUPVWKDWSD\WKHVDPHGROODUDPRXQWRIGLYLGHQGV²WKDWLVWKHGLYLGHQG
UHPDLQVFRQVWDQWVXFKWKDWWKHUHLVQRJURZWKLQGLYLGHQGVILUPVWKDWSD\GLYLGHQGVWKDWJURZDW
DQRUPDORUFRQVWDQWUDWHEHFDXVHWKHILUPJURZVDWWKHVDPHUDWH²WKDWLVWKHUDWHRIJURZWKLV
WKHVDPHHDFK\HDUDQGILUPVWKDWSD\GLYLGHQGVWKDWKDYHGLIIHUHQWJURZWKUDWHV²WKDWLVWKH
UDWHRIJURZWKLVQRQFRQVWDQW
o 9DOXLQJVWRFNVZLWK]HURJURZWK²D]HURJURZWKVWRFNLVRQHZKHUHDOOIXWXUHGLYLGHQGVDUH
Ö ='
Ö == '
Ö = ' DQG
H[SHFWHGWREHWKHVDPHVXFKWKDW '
∞
'
'
'
'
3Ö =
+
++
= ∞
+ UV + UV + UV UV
%HFDXVHD]HURJURZWKVWRFNKDVGLYLGHQGSD\PHQWVWKDWUHSUHVHQWDSHUSHWXLW\DV\RXFDQVHH
IURPWKHERWWRPIRUPRIWKHHTXDWLRQILQGLQJWKHYDOXHRIVXFKVWRFNVLVYHU\VLPSOH)RU
H[DPSOHLIZRXOGOLNHWRLQYHVWLQDVWRFNWKDWSURPLVHVWRSD\DGLYLGHQGHYHU\\HDU
EHJLQQLQJLQRQH\HDUDQGFRQWLQXLQJXQWLOWKHILUPVWRSVEXVLQHVVZKLFKLVQHYHUH[SHFWHGWR
RFFXUDQGWKHUHTXLUHGUHWXUQRQVLPLODUULVNLQYHVWPHQWVLVSHUFHQWWKHPDUNHWYDOXHRIWKH
VWRFNVKRXOGEH 7KLVFRXOGEHDSUHIHUUHGVWRFN
*HQHUDOO\ZHFDQILQGWKHPDUNHWYDOXHRIWKHVWRFNLQVXFKILQDQFLDOVRXUFHVDV7KH:DOO
6WUHHW-RXUQDO7KXVRIWHQZHXVHWKLVLQIRUPDWLRQWRGHWHUPLQHWKHUDWHRIUHWXUQLQYHVWRUV
UHTXLUHZKHQLQYHVWLQJLQVLPLODUW\SHVRILQYHVWPHQWV)RUH[DPSOHVXSSRVHWKDWDVWRFNWKDW
SD\VDFRQVWDQWGLYLGHQGHTXDOWRSHUVKDUHFXUUHQWO\LVVHOOLQJIRUSHUVKDUH:HNQRZ
WKHIROORZLQJPXVWH[LVW
9DOXDWLRQ&RQFHSWV²
=
ZKLFKPHDQVWKDWUV =
= = UV
$VDUHVXOWLIDVWRFNSD\VDFRQVWDQWGROODUGLYLGHQGZHFDQGHWHUPLQHUsDVIROORZV
'
UV =
3
o 9DOXLQJVWRFNVZLWKQRUPDORUFRQVWDQWJURZWK²LIDILUPKDVQRUPDORUFRQVWDQWJURZWK
WKHQWKHGLYLGHQGLWSD\VLVH[SHFWHGWRJURZDWDFRQVWDQWUDWHHDFK\HDU7KLVPHDQVWKDW
Ö = ' + J '
Ö = ' + J DQGVRIRUWKJUHSUHVHQWVWKHFRQVWDQWJURZWKUDWH7KXVWR
'
Ö
ILQG 3 ZHKDYHWKHIROORZLQJ
' + J ' + J ' + J ∞
3Ö = +
+
+
+ UV + UV + UV ∞
Ö
' + J
'
=
=
UV − J
UV − J
7KHIRUPRIWKHHTXDWLRQJLYHQLQWKHODVWOLQHLVDQDOJHEUDLFVLPSOLILFDWLRQWKDWUHVXOWVEHFDXVH
WKHJURZWKUDWHJLVFRQVWDQW
&RQVLGHUDFRPSDQ\WKDWMXVWSDLGDGLYLGHQG7KHFRPSDQ\¶VGLYLGHQGKDVJURZQDWDUDWH
HTXDOWRSHUFHQWHDFK\HDUIRUWKHODVW\HDUVDSDWWHUQWKDWLVH[SHFWHGWRFRQWLQXHIRUWKH
QH[W\HDUV,IWKHUHTXLUHGUDWHRIUHWXUQRQVLPLODUULVNLQYHVWPHQWVLVSHUFHQWZKDWLV
WKHPDUNHWYDOXHRIWKHILUP¶VVWRFN"7KLVILUP¶VGLYLGHQGLVH[SHFWHGWRJURZDWSHUFHQWHDFK
\HDUIRUWKHQH[W\HDUVVRWKHVWUHDPRIGLYLGHQGVUHFHLYHGE\VWRFNKROGHUVZLOOORRNOLNH
WKLV
<HDU
'LYLGHQG
&RPSXWDWLRQJ 39RI 'Ö W #
Ö '
Ö
' Ö '
Ö '
Ö '
Ö
' Ö '
Ö '
Ö '
9DOXDWLRQ&RQFHSWV²
Ö '
7RWDO
8VLQJDVSUHDGVKHHWWRFRPSXWHWKHGLYLGHQGVDQGWKHSUHVHQWYDOXHVRIWKHGLYLGHQGVIRU
\HDUVZHILQG
Ö = 39RI ¦ '
W
W =
,IZHDVVXPHWKHGLYLGHQGVJURZDWDFRQVWDQWSHUFHQWIRUDQLQILQLWHSHULRGZHFDQDSSO\WKH
FRQVWDQWJURZWKGLYLGHQGGLVFRXQWPRGHODVIROORZV
Ö
' + J '
3Ö = =
UV − J
UV − J
=
=
= − $V\RXFDQVHHWKLVUHVXOWLVJUHDWHUWKDQWKHUHVXOWIRXQGIRUWKH39RIWKHGLYLGHQGVWKDW
DUHH[SHFWHGWREHSDLGIRUWKHQH[W\HDUV7KLVVXJJHVWVWKDWWKH39RIWKHGLYLGHQGV
H[SHFWHGWREHSDLGIURP<HDUWR<HDU∞LVDSSUR[LPDWHO\
o ([SHFWHGUDWHRIUHWXUQRQDFRQVWDQWJURZWKVWRFN²LIZHUHDUUDQJHWKHHTXDWLRQJLYHQIRUWKH
FRQVWDQWJURZWKPRGHOZHKDYHWKHIROORZLQJ
UÖV =
Ö
'
+J
3
([SHFWHGUDWH
RI UHWXUQ
=
([SHFWHG
([SHFWHGJURZWKUDWH
+
GLYLGHQG\LHOG RUFDSLWDOJDLQV\LHOG
,IZHNQRZWKHPDUNHWYDOXHRIWKHVWRFN3WKHPRVWUHFHQWGLYLGHQGSD\PHQW'DQGWKH
UDWHDWZKLFKIXWXUHGLYLGHQGVDUHH[SHFWHGWRJURZJZHFDQFRPSXWHWKHUDWHRIUHWXUQWKDW
LQYHVWRUVH[SHFWWKHVWRFNWR\LHOG)RUH[DPSOHVXSSRVHDFRPSDQ\¶VVWRFNLVFXUUHQWO\VHOOLQJ
IRUWKHODWHVWGLYLGHQGSDLGE\WKHILUPZDVDQGIXWXUHGLYLGHQGVDUHH[SHFWHGWRJURZ
DWSHUFHQW7KHH[SHFWHGUDWHRIUHWXUQIRUWKLVVWRFNLV
+ = + = = UÖV =
,QWKLVVLWXDWLRQ3 DQG 'Ö 9DOXDWLRQ&RQFHSWV²
,QRQH\HDUWKHSULFHRIWKHVWRFNLVH[SHFWHGWREH
Ö
Ö
Ö
Ö
'
'
'
'
∞
3Ö =
+
+
+
=
∞ −
UV − J
+ UV + UV + UV =
=
= − 1RWLFHWKDWLQRQH\HDUWKHYDOXHRIWKHVWRFNLVWKHSUHVHQWYDOXHRIWKHGLYLGHQGVH[SHFWHGWREH
SDLGIRUWKHUHPDLQLQJOLIHRIWKHILUPZKLFKLV 'Ö 'Ö 'Ö ∞ %HFDXVHWKHYDOXHRIWKHVWRFNLVH[SHFWHGWRLQFUHDVHWRRQH\HDUIURPQRZLQYHVWRUVLQ
WKLVVWRFNH[SHFWWRHDUQDFDSLWDOJDLQV\LHOGHTXDOWR
&DSLWDO
(QGLQJYDOXH%HJLQQLQJYDOXH 3Ö − 3
=
=
JDLQV\LHOG
%HJLQQLQJYDOXH
3
=
− = = 7KHGLYLGHQG\LHOGLQYHVWRUVH[SHFWHTXDOV
Ö
'LYLGHQG '
= =
= = \LHOG
3
7KXVWKHWRWDOH[SHFWHGUDWHRIUHWXUQIRUWKHVWRFNLV
UÖV ZKLFKLVWKHVDPHUHVXOWZHIRXQGHDUOLHU
o 9DOXLQJVWRFNVZLWKQRQFRQVWDQWJURZWK²PRVWILUPVGRQRWJURZWKDWFRQVWDQWUDWHVHDFK
\HDU²WKDWLVQRQFRQVWDQWJURZWKH[LVWV)RUVXFKFRPSDQLHVEHFDXVHJURZWKLVQRWFRQVWDQW
ZHFDQQRWDSSO\WKHFRQVWDQWJURZWKPRGHO7KLVVXJJHVWVWKDWZHKDYHWRXVHWKHWHFKQLTXH
GLVFXVVHGLQWKHWLPHYDOXHRIPRQH\VHFWLRQRIWKHQRWHVWRILQGWKHSUHVHQWYDOXHRIDQXQHYHQ
FDVKIORZVWUHDP)RUWXQDWHO\KRZHYHUZHFDQVLPSOLI\WKHFRPSXWDWLRQE\DVVXPLQJWKDWD
ILUPWKDWFXUUHQWO\H[SHULHQFHVQRQFRQVWDQWJURZWKZLOOEHJLQFRQVWDQWJURZWKDWVRPHIXWXUH
GDWH&RQVLGHUIRUH[DPSOHDFRPSDQ\WKDWH[SHFWVLWVJURZWKGXULQJWKHQH[WILYH\HDUVWREH
SHUFHQWSHUFHQW±SHUFHQWSHUFHQWSHUFHQWDQGWKHQJURZWKLVH[SHFWHGWROHYHO
RIIWRSHUFHQWZKHUHLWZLOOUHPDLQIURPWKDWSRLQWRQ,QWKLVFDVHWKHILUPKDVQRQFRQVWDQW
JURZWKIRUILYH\HDUVDQGWKHQFRQVWDQWJURZWKIURP<HDUXQWLO<HDU’7KLQNDERXWKRZWR
9DOXDWLRQ&RQFHSWV²
DSSO\\RXUNQRZOHGJHRISUHVHQWYDOXHWHFKQLTXHVDQGWKHWHFKQLTXHVGLVFXVVHGLQHDUOLHUWR
GHWHUPLQHWKHYDOXHRIWKHVWRFN,QJHQHUDOWHUPVZHZRXOGKDYHWRFRPSXWHWKHYDOXHDV
IROORZV
3Ö =
Ö
Ö
Ö + 3Ö
'
'
'
1
1
+
+
+
1
+ UV + UV + UV =
Ö + J + 3Ö
Ö + J ' + J '
'
1 −
1
1
+
+
+
1
+ UV + UV + UV ZKHUH1LVWKH\HDULQZKLFKQRQFRQVWDQWJURZWKHQGVDQGWKXVFRQVWDQWJURZWKEHJLQV
$FFRUGLQJWRWKLVHTXDWLRQZHKDYHWRGHWHUPLQHWKHGLYLGHQGVIRUHDFKSHULRGLQZKLFKWKH
JURZWKUDWHLVQRQFRQVWDQWDQGILQGWKHSUHVHQWYDOXHRIWKRVHGLYLGHQGV:HDOVRKDYHWRILQG
WKHSULFHRIWKHVWRFNDWVRPHIXWXUHGDWH²WKDWLV 3Ö1 ²DQGFRPSXWHWKHSUHVHQWYDOXHRIWKLV
DPRXQW
Ö
Ö
%HFDXVHQRQFRQVWDQWJURZWKHQGVLQ<HDU1WKHGLYLGHQGLQ<HDU1LV '
1 + = ' 1 + J QRUP ZKHUHJQRUPLVWKHQRUPDORUFRQVWDQWJURZWKUDWH:KHQQRQFRQVWDQWJURZWKHQGVFRQVWDQW
JURZWKEHJLQVZHFDQDSSO\WKHFRQVWDQWJURZWKGLYLGHQGPRGHOWRFRPSXWHWKHYDOXHRIWKH
VWRFNDWWKDWSRLQW
Ö + J Ö
'
'
QRUP
1 +
=
3Ö1 = 1
UV − J QRUP
UV − J QRUP
8VLQJWKLVHTXDWLRQZHFDQFRPSXWH 3Ö1 ZKLFKUHSUHVHQWVWKHSUHVHQWYDOXHLQ<HDU1RIWKH
GLYLGHQGVWKDWDUHH[SHFWHGWREHSDLGLQ<HDU1WKURXJK<HDU’E\DSSO\LQJWKHFRQVWDQW
JURZWKPRGHOLQWKH\HDULQZKLFKGLYLGHQGVVWDUWWRJURZDWDFRQVWDQWUDWH7RLOOXVWUDWHOHW¶V
FRQWLQXHZLWKWKHVLWXDWLRQWKDWZDVLQWURGXFHGHDUOLHU²DILUPH[SHFWVLWVGLYLGHQGVWRJURZDW
QRQFRQVWDQWUDWHVIRUWKHQH[WILYH\HDUVDQGWKHQWRJURZDWWKHFRQVWDQWUDWHRISHUFHQW,I
WKHILUPUHFHQWO\SDLGDGLYLGHQGHTXDOWRDQGWKHUHTXLUHGUDWHRIUHWXUQRQVLPLODUULVN
LQYHVWPHQWVLVSHUFHQWZKDWVKRXOGEHWKHSULFHRIWKHVWRFN"8VLQJWKLVLQIRUPDWLRQWKH
GLYLGHQGVIRUWKHQH[WILYH\HDUVDUHH[SHFWHGWREH
9DOXDWLRQ&RQFHSWV²
<HDU
'LYLGHQG 'Ö W 39RI 'Ö W #
&RPSXWDWLRQ Ö '
Ö '
Ö
' Ö '
Ö
' $IWHU<HDUWKHH[SHFWHGJURZWKUDWHZLOOEHSHUFHQWSHU\HDU$VDUHVXOWLQ<HDUWKURXJK
<HDUWKHGLYLGHQGVZLOOEH
<HDU
'LYLGHQG 'Ö W &RPSXWDWLRQJ 39RI 'Ö W #
Ö '
Ö '
Ö
' Ö '
Ö
' Ö '
Ö '
Ö '
%HFDXVHWKHGLYLGHQGVJURZDWDFRQVWDQWUDWHDIWHU<HDUZHFDQDSSO\WKHFRQVWDQWJURZWK
PRGHODWWKDWSRLQWVXFKWKDWZHKDYHWKHIROORZLQJ
Ö
'
3Ö =
=
= UV − J Q − 7KXVWKHYDOXHRIWKHGLYLGHQGVH[SHFWHGLQ<HDUWKURXJK<HDULVDWWKHHQGRI<HDU
6WDWHGGLIIHUHQWO\WKLVVWRFNFDQEHVROGIRUILYH\HDUVIURPWRGD\,IZHILQGWKHSUHVHQW
YDOXHRIWKHVWRFNSULFHH[SHFWHGLQ<HDUZHKDYH
39RI 3Ö =
= $JDLQQRWLFHWKDWWKHUHVXOWLVQHDUO\WKHVDPHDVWKHVXPRIWKHSUHVHQWYDOXHVRIWKHGLYLGHQGV
9DOXDWLRQ&RQFHSWV²
H[SHFWHGLQ<HDUWKURXJK<HDUVKRZQLQWKHWDEOHHDUOLHU7KXVWKHSUHVHQWYDOXHRIDOO
WKHGLYLGHQGVH[SHFWHGLQWKHIXWXUHLV
3 39RI 'Ö WKURXJK 'Ö 39RI 'Ö WKURXJK 'Ö∞ 7KLVLVWKHSULFHDWZKLFKWKHVWRFNVKRXOGEHVHOOLQJWRGD\
7KHNH\WRFRPSXWLQJWKHYDOXHRIDVWRFNWKDWH[SHULHQFHVQRQFRQVWDQWJURZWKLVWKDWZH
DVVXPHFRQVWDQWJURZWKRFFXUVDWVRPHSRLQWLQWKHIXWXUH²LWPLJKWVWDUWLQILYH\HDUV
\HDUVRU\HDUVZKHQQRQFRQVWDQWJURZWKHQGVZHFDQDSSO\WKHFRQVWDQWJURZWKPRGHOWR
FRPSXWHWKHYDOXHRIWKHH[SHFWHGGLYLGHQGVIURPWKDWSRLQWXQWLOWKHILUPFHDVHVWRH[LVWLH
’DQGWKHQILQGWKHSUHVHQWYDOXHRIWKDWDPRXQW3ULRUWRWKHSRLQWZKHUHQRQFRQVWDQWJURZWK
RFFXUVZHKDYHWRFRPSXWHWKHGLYLGHQGIRUHDFK\HDUILQGWKHSUHVHQWYDOXHRIHDFKGLYLGHQG
DQGVXPWKHUHVXOWVMXVWOLNHZHGLGZKHQZHHQFRXQWHUHGDQXQHYHQFDVKIORZVWUHDPLQWLPH
YDOXHRIPRQH\SUREOHPV
2QDFDVKIORZWLPHOLQHWKHFXUUHQWVLWXDWLRQFDQEHLOOXVWUDWHGDVIROORZV
•
2WKHU6WRFN9DOXDWLRQ7HFKQLTXHV²LQYHVWRUVJHQHUDOO\XVHPRUHWKDQRQHPHWKRGWRHYDOXDWH
VWRFNV
o 9DOXDWLRQXVLQJ3(UDWLRV²PDQ\LQYHVWRUVOLNHWRXVHWKHSULFHWRHDUQLQJVUDWLRWRHVWLPDWH
WKHYDOXHRIDVWRFNUHPHPEHUWKDWWKH3(UDWLRLV
3
0DUNHWSULFHSHUVKDUH
3 (UDWLR =
= (DUQLQJVSHUVKDUH
(36 ,IZHFDQHVWLPDWHWKHILUP¶VHDUQLQJVSHUVKDUHD³QRUPDO´3(UDWLRFDQEHXVHGWRHVWLPDWHWKH
DSSURSULDWHPDUNHWYDOXHRIWKHVWRFN)RUH[DPSOHLIDVWRFNQRUPDOO\KDVD3(UDWLRHTXDOWR
DQGDQDO\VWVHVWLPDWHWKDWWKHFRPSDQ\¶V(36ZLOOEHSHUVKDUHWKHQXVLQJWKH3(UDWLR
DSSURDFKWKHYDOXHRIWKHVWRFNZRXOGEHHVWLPDWHGWREH [,QWKLVFDVHZHDUH
VD\LQJWKDWWKHVWRFNQRUPDOO\VHOOVIRUWLPHVLWV(36
9DOXDWLRQ&RQFHSWV²
o (YDOXDWLQJVWRFNVXVLQJWKH(FRQRPLF9DOXH$GGHG(9$DSSURDFK²(9$LVEDVHGRQWKH
FRQFHSWWKDWHDUQLQJVVKRXOGEHSDLGWRWKRVHZKRSURYLGHIXQGVWRWKHILUP²WKDWLVERQG
KROGHUVDQGHTXLW\KROGHUV²EHIRUHWKHILUP¶VWUXH³HFRQRPLF´HDUQLQJVFDQEHGHWHUPLQHG(9$
LVWKHDPRXQWE\ZKLFKWKHILUP¶VYDOXHFKDQJHVDIWHUFRPSHQVDWLQJLQYHVWRUVIRUWKHIXQGVWKH\
SURYLGHWKHILUP
(9$ (%,77D[UDWH±>,QYHVWHGFDSLWDO[$IWHUWD[FRVWRIIXQGVDVDSHUFHQW@
7RLOOXVWUDWHVXSSRVHZHKDYHWKHIROORZLQJLQIRUPDWLRQDERXWDILUP
(%,7
PLOOLRQ
7RWDOFDSLWDO /RQJWHUPGHEW(TXLW\
PLOOLRQ
0DUJLQDOWD[UDWH
'HEWDVVHWVUDWLR
%HIRUHWD[FRVWRIIXQGV
1XPEHURIRXWVWDQGLQJVKDUHRIFRPPRQVWRFN
PLOOLRQ
(9$ ±±>±@ ± 7KXVWKH³WUXH´LQFRPHWKDWWKHILUPJHQHUDWHGLVPLOOLRQ$VDUHVXOWWKHILUPFDQSD\D
FRPPRQVWRFNGLYLGHQGHTXDOWR PLOOLRQPLOOLRQVKDUHVEHIRUHLWVYDOXHLV
WKUHDWHQHG
•
&KDQJHVLQ6WRFN3ULFHV²ZHJHQHUDOO\FRQVLGHUWKHVWRFNPDUNHWWREHLQHTXLOLEULXPZKHQWKH
H[SHFWHGUDWHRIUHWXUQDQGWKHUHTXLUHGUDWHRIUHWXUQDUHHTXDO²WKDWLV ÖUV U,IWKHPDUNHWLVQRW
LQHTXLOLEULXPVD\WKHUHTXLUHGUHWXUQUVLVJUHDWHUWKDQWKHH[SHFWHGUHWXUQ UÖV IRUDVWRFNWKHQ
LQYHVWRUVZRXOGQRWZDQWWRSXUFKDVHWKHVWRFNZKLFKZRXOGFDXVHLWVSULFHWRGURSDQGLWV
H[SHFWHGUHWXUQWRLQFUHDVHXQWLO UÖV UVWKHRSSRVLWHZRXOGRFFXULIUV UÖV • 9DOXDWLRQ6XPPDU\4XHVWLRQV²<RXVKRXOGDQVZHUWKHVHTXHVWLRQVDVDVXPPDU\IRUWKHFKDSWHU
DQGWRKHOS\RXVWXG\IRUWKHH[DP
o ,QVLPSOHWHUPVKRZLVYDOXHGHWHUPLQHG"
ƒ 9DOXLQJERQGV
ƒ 9DOXLQJHTXLW\
o :KDWDUHWKHFRPSRQHQWVRIUHWXUQLQJHQHUDO"
ƒ :KDWDUHWKHFRPSRQHQWVRIWKHUHWXUQRQDERQGFDOOHG"2QDVWRFN"
ƒ :KDWLVWKH\LHOGWRPDWXULW\<70"
ƒ :KDWLVWKHUHODWLRQVKLSEHWZHHQ<70FRXSRQUDWHDQGPDUNHWYDOXHRIDERQG"
o +RZGRHVWKHSULFHRIDERQGFKDQJHRYHUWLPH"'RHVWKHSULFHRIDERQGFKDQJHRYHUWLPH
HYHQLILQWHUHVWUDWHVGRQRWFKDQJH"([SODLQ
o :KDWGRHVLWPHDQIRUWKHVWRFNPDUNHWWREHLQHTXLOLEULXP"
9DOXDWLRQ&RQFHSWV²