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Feb 12 2020

Common stock




Common stock-Common stock
Common stock-COMMON STOCK VALUATION Concept: Understand how common stocks are valued. There are basically three ways of valuing common stock: 1) using the present value of future dividends, 2) using the



COMMON STOCK VALUATION

Concept: Understand how common stocks are valued.

There are basically three ways of valuing common stock: 1) using the present value of future dividends, 2) using the present value of free cash flow, and 3) using the present value of current activities + the present value of growth opportunities. Here, we look at each of these methods individually.

Objectives:

  • Understand and define how common stocks are valued
  • Discuss and demonstrate how common stocks are valued by future div >Suggested Grades:

Ninth Grade – Tenth Grade – Eleventh Grade – Twelfth Grade – College – Adult Education – Business Education

STOCK VALUATION LESSON PLAN

Lesson – Common Stock Valuation (see below for printable lesson)

Many pre-calculated examples

  1. What is common stock?
    • Ask >Bring in the financial section of the local newspaper
      • look at the different stocks currently traded
      • ask >Method 1: PV of future dividends
        • introduce constant div >Method 2: PV of free cash flow
          • explain free cash flow
          • Introduce formula
          • work through examples
        • Method 3: PV of current activities + PV of growth opportunities
          • talk about relationship between current activities and EPS
          • look at formula for PV of current activities and work through examples
          • introduce PVGO
          • look at formula (add in div >Talk about P/E ratio
            • Ask class to consider high PV versus low PV – which offers a better deal?
            • Calculate PE ratios – bring in newspaper stock listing that include PE ratios – pick out those stocks the class would buy based on PE

Assessment/Evaluation
Have students complete worksheet. A passing grade is 70% or greater.

Print out the teaching lesson pages and exercise worksheets for use with this lesson:

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Common stock




SOURCE: http://www.moneyinstructor.com/lesson/stockvaluation.asp


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