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Week 14 notes

by: Laura Notetaker

Week 14 notes Fin 4310

Laura Notetaker
GPA 3.77
Managerial Finance
Dr. Oscar Varela

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About this Document

These are the notes for week 14
Managerial Finance
Dr. Oscar Varela
Class Notes
Managerial Finance
25 ?




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This 0 page Class Notes was uploaded by Laura Notetaker on Thursday November 26, 2015. The Class Notes belongs to Fin 4310 at University of Texas at El Paso taught by Dr. Oscar Varela in Summer 2015. Since its upload, it has received 29 views. For similar materials see Managerial Finance in Finance at University of Texas at El Paso.


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Date Created: 11/26/15
Week 14 notes D1 2 Po 2 01205 2857 Cost of equity 12 g 5 EPSl 3 Retention rate 323 33 If this was treated as a cash cow Po 30120 25 use EPS instead of dividends because you are not retaining anything Growth is zero if the retention rate is 0 ROE g Retention rate x ROE 5 33x 15 Retained earnings improve the growth 285725357 the value rises by 357 by retaining 33 And the value of the 5 growth is this 357 If ROE 10g 333 PO 290120033 2307 g Retention rate x ROE We could say that this growth rate has a negative value because if you don39t retaining anything you will have 25 You are losing 193 In year 1 rm A decides to retain 1 and invest it 1 will be the cash out ow for investment Earn 15 cents per each dollar 1 x 1512 125 is the gross present value The NPV is 025 Week 14 notes In year 2 EP5 will be 3 x 105 315 Retention rate 315 x 13 or 33 105 to invest 105 per share to invest 105 1 x 1512 13185 NPV 02625 In year 3 EPS 315 x 105 33075 Retention rate 33075 x 33 11025 11025 per share to invest 11025 015 12 1378125 NPV 0275625 Year 1 year 2 025 02625 Between each year there is 5 growth 025012005 357 Year 3 0274625 2857 is the total value of the stock it can be divided into 2 components Cash cow part 25 357


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