This course will cover the valuation of financial assets including bonds, common stock, and preferred stock.
We will include many example problems, both in the format of presentations and Excel worksheet problems. The Excel worksheet presentations will include a downloadable Excel workbook with at least two tabs, one with the answer, the second with a preformatted worksheet that can be completed in a step-by-step process along with the instructional videos.
The general concept used to value financial assets is to take the present value of future cash flows from the financial asset. Therefore, we will need to use present value concepts and calculations.
The cash flow related to bonds will generally consist of a series of interest payments and a principal payment at maturity of the bond. We can use annuity calculations to determine the present value of the interest payments and present value of one calculation to determine the present value of principal at maturity.
Preferred stock has characteristics similar to bonds in that the payments are often standardized. However, we do not have a maturity date as we do with bonds.
Common stock can be more complex as we consider the future cash flow of dividends in an attempt to value the securities. The common stock dividends are more likely to change over time and we do not have a maturity date as we do with bonds.