ce fixed tax-deferred annuity _price-earnings ratio (PE) er ee er eae ae tet eg Poa ee Pen individual Retirement rit ron) Lonmnatyy COU per eka Pa eat Byer eters eertens peas en charter coy ery eee ee Pers eee eee odd lot Peon? eG peers eres Peet peas Penn neente ty ariable annuity Pees pari en fain enact pee ee a Cees Perr) CONCEPTS EXAMPLES 11.1 Ordinary annuities Use Future Value of an Annuity table, Table 11-1 (Find future value lump sum.) Invest money at end of each period, Find future value. Answers how much money accumulates, Example: 2 years, $2,000 ordinary annuity 36% annually Money accumulates to $2,000 x 2.06000 = $4,120 in2 yn. @ 6% 11.1 Annuity due Use Future Value of an Annuity table, Table 11-1. (Find future value lump sum.) Invest money at beginning of period. Use Future Value of an Annuity Table but add one period and subtract one payment. Higher than ordinary annuity because money paid at beginning of period draws Interest. Example: 2 years, $2,000 annuity due at 6% annually Period:2+1=3 Money accumulates to 52,000 x 3.18360 ~ $2,000 = $4,367.20 in2yts © 6%CONCEPTS 111 Present value of an ordinary annuity (Find present value lump sum.) 11.1 Sinking fund Find periodic payment.) EXAMPLES Use Present Value of Annuity table, Tabie 11-2 {Calculate number of periods and rate per peviod, Multiply withdrawal for each period by table factor {o.get present value of an ordinary antl, Example: Receive $15,0 ‘compounded annually Factor: 4.62288 $15,000 x 4.62288 = $69,343.20 amount Pay today to have payments of $15,000 fee 100 for 6 years. Interest is 806 would years, Use Sinking Fund table, Table 11-3 Pay regular payments fora set number of periods to accumulate @ specific sum. Knowing the amount fxarple: $100,000 bond to retire (pay off 15 years from now. Interest 1096 compounded enna, Factor: 0.03147 $100,000 » 0.03147 = $3,147 payment each period to have $100,000 in 15 years NT Use Excet with annuities, present value, and sinking fund (Can use spreadsheet to track annuities Can use spreadsheet to calculate present value of anote Can create sinking fund table 1.2 Cash dividend on common stock ‘Grample: A company declares a dividend of $175,000, ‘There are 51,000 shares of common stock. Find the dividend per share. Divide the total dividend by the ‘outstanding shares $175,000 « $1,000 = $3.43 Determine the dividend received for $00 shares, Multiply shares times dividend, 500 « $3.43 © $1,715 receivedCONCEPTS: 11.2 Distributing profits between preferred ‘and common stockholders 11.2 Earnings per share EXAMPLES: Example: $500,000 to dstibute; 20,000 shares of {956 prefered stock, $100 par value; 85,000 shares ‘of common stock Multiply dividend rate by par value. 0.09 x $100 19 eae per share ot prefered sock Multiply dividend amount per share by number of shares of preferred stock '59 « 20,000 = $180,000 aidend pais 9 refered snarenodess Subtract total amount pad to prefered stockholders from total dstbutes. £500,000 - $180,000 = $320,000 Divide total amount available for common stock stockholders by fotal shares of common stock 19320,000 + 85,000 = $3.76 dividend per share ‘common stork Femnings Diba esa Share of Common Soak Earnings per Share ‘Example: 125,000 shares of common stock; '5600,000 distibuted to stockholders $600,000 + 125,00 4.80. errings parshare 11.2 Current yield ‘Current iid = Atm Oded per Share losing Price pr Share Example: $1.80 Dividend and list 9 closing price of $72 $1.80+$72= 2.50% canent yield 11.2. Price-eamnings (PE) ratio 11.2 Use Excel with stock investments ‘rent Pieper Shave PE ato aanaal Net bear Fringe par a Example: Net earnings of $3.42 on stock selling at $30.40 $3040+$342=9 —PEratio. se to track stocks Find the dividend amount paid to prefered and commen stockholders.