FIN 302 Lecture Notes - Lecture 15: Detroit Bankruptcy, Special Dividend, Berkshire Hathaway
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FIN 302 Full Course Notes
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Document Summary
Today is all about what investment banking analysts do. Stock - a share of ownership in the firm, which entitles the owner to: Residual payments - the shareholders are paid last after all debts are paid back (bank loans and bonds) Vote at stockholders" meetings on key issues. Dividend - distribution of company"s profits to shareholders. Regular dividend - scheduled dividend paid every quarter. Special dividend - one-time distribution of cash to shareholders. Rationale: company"s value is derived from a forecast of future free cash flows (fcfs) generated by the firm. Step by step methodology: project fcfs in explicit forecast (5-7 years) 1. 1: estimate terminal value (tv) at the end of the explicit forecast. Usually estimates as a perpetuity, after the explicit forecast period (years past year 5) Value of all future cash flows after the explicit forecast period: value of operating assets (voa) = pv(fcfs) + pv (tv)
