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RPF Calculators

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37 views

RPF Calculators

Try

Uploaded by

datsno
Copyright
© © All Rights Reserved
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd
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RISK PREMIUM FACTOR VALUATION MODEL

The calculator is based on the Risk Premium Factor Valuation model (Hassett 2011)
Learn more about the book: http://bit.ly/pwAKIj
It is designed to allow the user to test various scenarios and sensitivity to assumptions.
Inputs: These inputs can be derived from actual report results such as the current 10-year or 30-year
yield and S&P Earnings or adjusted. For example, it has recently appeared desirable to adjust the 10-
year yield upwards to reflect the current unusual bond market. Projected earnings can be used to create
forecast P/E and S&P Index values

Assumptions: While assumptions are based on values derived from Hassett's research they can be
adjusted to test various scenarios

Results: Intermediate results


Predicted Values: Values predicted by the model, where:
P/E = 1 / [Rf x (1+RPF) - Real Growth Rate - Inflation]
S&P Index = P/E x Operating Earnings

CALCULATOR

Inputs
Rf (10 or 30 Year Treasury) 3.7%
S&P 500 Operating Earnings 79.02
S&P 500 Actual Price 1,147

Assumptions
Real Interest Rate 2.0%
RPF (Risk Premium Factor) 1.48
Beta 1.00
Real Growth Rate 2.6%

Results
Implied Inflation 1.7%
Equity Risk Premium 5.4%
Predicted Values
P/E 20.8
S&P 500 Predicted 1,641
Price Relative to Predicted 43%

Copyright © 2011 by Stephen D. Hassett. All rights reserved.


RISK PREMIUM FACTOR VALUATION MODEL

The calculator is based on the Risk Premium Factor Valuation model (Hassett 2011)
Learn more about the book: http://bit.ly/pwAKIj
It is designed to allow the user to test various scenarios and sensitivity to assumptions.
Inputs: These inputs can be derived from actual report results such as the current 10-year or -year yield and
S&P Earnings or adjusted. For example, it has recently appeared desirable to adjust the 10-year yield
upwards to reflect the current unusual bond market. Projected earnings can be used to create forecast P/E
and S&P Index values

Assumptions: While assumptions are based on values derived from Hassett's research they can be
adjusted to test various scenarios

Results: Intermediate results


Predicted Values: Values predicted by the model, where:
RIGR = Rf x (1+RPF x Beta) - Rf + Real Int Rate - E / P
S&P Index = P/E x Operating Earnings

CALCULATOR

Inputs
S&P 500 Index Price 1,142
S&P 500 Operating Earnings 80.00

Assumptions
Real Interest Rate 2.0%
RPF (Risk Premium Factor) 1.48
Beta 1.00
Real Growth Rate 2.6%

Results
P/E 14.28
Predicted Values
Implied Rf 5.1%

Copyright © 2011 by Stephen D. Hassett. All rights reserved.


year or -year yield and
he 10-year yield
o create forecast P/E

h they can be
RISK PREMIUM FACTOR VALUATION MODEL

The calculator is based on the Risk Premium Factor Valuation model (Hassett 2011)
Learn more about the book: http://bit.ly/pwAKIj
It is designed to allow the user to test various scenarios and sensitivity to assumptions.
Inputs: These inputs can be derived from actual report results such as the current 10-year or -year yield and
S&P Earnings or adjusted. For example, it has recently appeared desirable to adjust the 10-year yield
upwards to reflect the current unusual bond market. Projected earnings can be used to create forecast P/E
and S&P Index values

Assumptions: While assumptions are based on values derived from Hassett's research they can be
adjusted to test various scenarios

Results: Intermediate results


Predicted Values: Values predicted by the model, where:
RIGR = Rf x (1+RPF x Beta) - Rf + Real Int Rate - E / P
S&P Index = P/E x Operating Earnings

CALCULATOR

Inputs
Rf (10 or 30 Year Treasury) 3.7%
S&P 500 Index Price 1,333
S&P 500 Operating Earnings 79.02

Assumptions
Real Interest Rate 2.0%
RPF (Risk Premium Factor) 1.48
Beta 1.00

Results
Implied Inflation 1.7%
P/E 16.87
Equity Risk Premium 5.5%
Predicted Values
Real Implied Growth Rate (RIGR) 1.5%

Copyright © 2011 by Stephen D. Hassett. All rights reserved.


year or -year yield and
he 10-year yield
o create forecast P/E

h they can be

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