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Abertis has a higher ratio of debt (.8) but its very profitable.

External financing sources


Issues of new equity:
Types of shares:
- Ordinary shares: 1: Economic rights 2. Political rights; and a
right thats between the two: Preferential Subscription Rights.
- Preference (or preferred) Shares: part of the equity of the
company, owners get dividends, only if there are profits, of
course!! In case of business failure, the sale of assets go first to
the creditors (debt), then to the preferred stock holders and the
last are the shareholders.
- Non-voting shares: theyre like ordinary shares, but owners
dont get any voting rights.
- Redeemable shares: they have a maturity.
Shares and bonds are securities. Preferred stock are hybrid securities.
2 criteria for decide where to invest:
-PER: Price To Earnings ratio: using the net income of the company,
after taxes and before dividends. Net Income / n of outstanding
shares = Net Income per Share
Price per share / Net Income per share = years that well need to hold
the stock to recover what we have paid.
Its also used the inverse of the PER.
-

Dividends model: Price is equal to the dividend for the next


period divided by the k (discount rate, personal) the g (growth
rate of the dividend). Example: k=.1 g=.3 D=4 P = 57,14
units

CAPM
K = Rf = beta (Rm Rf)
Rf= return on the non-risk asset (like the german bond)
Rm = expected return of the market
Beta= coefficient
K = return of the non-risk asset + risk premium
23/9/16
Exam question:
The IRR :
doesnt depend on our profitability expectations or requirements
A negative IRR doesnt mean that the inv project will have losses
It doesnt depend of the exp cash flows

It doesnt depend on the initial investment


CAPM:
Beta: shows the volatility of the stock with respect to the volatility
of the market itself.
Beta = 1, completely correlated with the market
Beta <1 less volatile than the market
Beta > 1 more volatile than the market
If beta <0, inverse relationship.
K=?
Rf=2% / Rm = 12% / Beta = 1,4
K = 16% Discount rate that we would use in the Dividend model
Exercise: Expctd div: 6 euro, g=.05 min k=?
Rf= 5% Rm= 14%
Beta for biotec companies= 1,46
Min k = 18% which is a price of 45.66, if the price is lower than this,
invest.
Distinction btw primary and secondary markets.
When its a brand new bond, we say be subscribe instead of buy.
How to issue new shares? We need the help of investment banks
(goldman, morgan Stanley, etc), in spain Caixabank, etc (not
separated btw commercial and investment banks).
Banks syndicate can also help in the process of issuing new shares.
They can be: of collective responsibility // or with limited
responsibility.
1) Outright sale: the investment bank buys all shares, sells them
later at a higher price.
2) Best selling effort: inv bank sells shares at an agreed price.
3) Stand by: Best selling effort + Inv bank buys the unsold shares
at a pre-agreed price
4) Private placement: Investment funds, Banks, Insurance
companies
5) Direct Sale: Specific stakeholders: shareholders, employees,
suppliers, clients, typically with small companies
Case of Bankia: massive failure

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