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Nxcum Share Price) + (R X Price) N +R)

Chapter 4 discusses methods for calculating the theoretical ex-rights price per share during a rights issue. It also covers calculating the cost of equity for unlevered and levered firms both with and without corporate taxes being considered. Chapter 5 further explores calculating the weighted average cost of capital both with and without taxes. It also discusses how to calculate the cost of equity for unlevered, levered, and relevered firms. Chapter 8 summarizes various asset-based, earnings-based, and discounted cash flow valuation methods including the book value method, CIV method, P/E ratio approach, dividend growth model, and discounted cash flow perpetuity approach.

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151 views4 pages

Nxcum Share Price) + (R X Price) N +R)

Chapter 4 discusses methods for calculating the theoretical ex-rights price per share during a rights issue. It also covers calculating the cost of equity for unlevered and levered firms both with and without corporate taxes being considered. Chapter 5 further explores calculating the weighted average cost of capital both with and without taxes. It also discusses how to calculate the cost of equity for unlevered, levered, and relevered firms. Chapter 8 summarizes various asset-based, earnings-based, and discounted cash flow valuation methods including the book value method, CIV method, P/E ratio approach, dividend growth model, and discounted cash flow perpetuity approach.

Uploaded by

WinniferTeoh
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Chapter 4

= Amount of capital to be raised / right price per shares


Number of share issued
= Number of new shares : Number of existing issued
Terms of right issue
shares

TERP ( N x Cum¿ share price)+( R x¿ price)


¿
(N + R)

Debt beta is zero Debt beta is not zero


Ungeared
Ve Ve Vd ( 1−t )
Keu,
βa,
βa=βe ×
[ Ve+Vd (1−t) ] βeu=βeg ×
[ Ve+Vd ( 1−t )
+ βd
] [
Ve+Vd ( 1−t ) ]
βeu

Regeared,
Ve+Vd ( 1−t ) Vd (1−t )
Keg
βeg
βe=βa × [ Ve ] βe=βa+ ( βa−βd ) × [ Ve ]
Vd ( 1−t )
Keg=Keu+ ( Keu− Kd ) × [ Ve ]
Keg=Rf +(Rm−Rf )β

Chapter 5
Without taxes With tax

Value of the firm Vu=Vg Vg=Vu+TB


Vg=Ve +Vd

WACC Keu=WACC Vdt


¿ Keu 1−
[ ( Ve +Vd )]
KegVe + Kd ( 1−t ) Vd
¿
Ve+ Vd
KeVe + Kd ( 1−t ) Vd
¿
Ve+ Vd

Cost of equity, Ke Vd Vd ( 1−t )


Keg, Keu
Keg=Keu+( Keu−Kd) × [ ]
Ve
Keg=Keu+ ( Keu− Kd ) [ Ve ]
Ke=Rf +( Rm−Rf ) β

Chapter 8

Asset based valuation


Book value
CIV method
profit
Excess post tax intangible average
the
¿
Industry cost of capital

[ FLG ' s profit−( Industry ' srate return x FLG' s tangible assets ) ] x (1−tax)
¿
Industry cost of capital

Earnings – based valuation


= P/E ratio x Net profit

= Share price x number of share (Market capitalisation)


Cash Flow Method

Dividend growth model

No growth

D0
¿
Ke

With growth
D1
¿
Ke−g
Discounted Cash Flow Method
Perpetuity
D1
¿
Ke−g

Chapter 9
Money Market

Step 1 USD 197,000


Step 2 FV
PV = =¿
n
(1+i( )
12
)

Step 3 Exchange rate


Step 4 n
FV =PV 1+i
( ( ))12
=¿

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