1. © K. Cuthbertson and D. Nitzsche Figures for Chapter 12 EQUITY FINANCE AND STOCK VALUATION (Investments : Spot and Derivatives Markets)

2. © K. Cuthbertson and D. Nitzsche Figure 12.1 : Equities - cash flow Time 0... 123 V D1D1 D2D2 D3D3 V = fair value D 1, D 2, D 3, … = expected dividends D4D4 4

3. © K. Cuthbertson and D. Nitzsche Figure 12.2 : Security market line ER i ER i = 5 + 8  i Beta,  i Q  i = 0.5 1 M r = 5% SML ER i = 9%

4. © K. Cuthbertson and D. Nitzsche Figure 12.3 : Gordon growth model Time 0... 123 P D1D1 D 1 (1+g) 4 D 1 (1+g) 2