Journal of Investment and Management
Volume 8, Issue 3, June 2019, Pages: 60-66
Received: Jul. 11, 2019;
Accepted: Aug. 7, 2019;
Published: Aug. 23, 2019
Views 180 Downloads 122
Shamsul Rijal Muhammad Sabri, School of Mathematical Sciences, Universiti Sains Malaysia, Penang, Malaysia
Wajeeh Mustafa Sarsour, School of Mathematical Sciences, Universiti Sains Malaysia, Penang, Malaysia
This paper developed long-term investment of stock cash flow activities comprising of how yearly investment contribution turns to share units and vice versa, how the series of dividends pay out are declared and finally, how the growth of share units are generated over the years of investing period. These investment model activities form cash inflows and outflows and hence, in return, the performance of this investment model can be evaluated. In addition, this model also constrained that, the yearly dividends obtained were being reinvested together with the annual contributions in accumulating shares. Besides presenting the computation of purchasing and selling of share units and the amount of dividend obtained, this paper contributed in the computation of the growth of the shares in a year, based on share issuance such as share split or consolidation, as well as bonus share rewards. Based on these activities, the net present value (NPV) was derived and the modified internal rate of return (MIRR) was determined by setting up zero-valued of NPV. We illustrated the computation of MIRR by looking at the investment activity towards Prolexus Berhad from the year 2011 to 2015. The increasing of company share prices through years, the encouraging series of dividend rates and generous of the company in issuing shares to the shareholders, were also clearly figured that determined attractive MIRR.
Shamsul Rijal Muhammad Sabri,
Wajeeh Mustafa Sarsour,
Modelling on Stock Investment Valuation for Long-term Strategy, Journal of Investment and Management.
Vol. 8, No. 3,
2019, pp. 60-66.
Besley, S. and Brigham, E. F. (2015). CFIN4 (with Finance CourseMate). (4 Ed), Cram101 Textbook Reviews.
Kierulff, H. (2008). MIRR: A better measure. Business Horizons, 51 (4), 321-329.
Kovvali, S. J. S. (2009). Application of Modified Internal Rate of Return Method for Watershed Evaluation. Agricultural Economics Research Review, 22 (Conference Number), 401-406.
Bonazzi, G. and Lotti, M. (2016). Evaluation of Investment in Renovation to Increase the Quality of Buildings: A Specific Discounted Cash Flow (DCF) Approach of Appraisal. Sustainability, 8 (3), 268.
Beaves, R. G. (1988). Net present value and rate of return: Implicit and explicit reinvestment assumptions. The Engineering Economist, 33 (4), 275-302.
Brealey, R. A., Myers, S. C., & Allen, F. (2006). Principles of corporate finance (8th Ed.). Boston: McGraw-Hill/Irwin.
Wiar, R. C. (1973). Economic implication of multiple rates-of return in the leveraged lease context. The Journal of Finance, 28 (5), 1275-1286.
Hazen, G. B. (2003). A new perspective on multiple internal rates of return. The Engineering Economist, 48 (1), 31-52.
Osborne M. J. (2010). A resolution to the NPV-IRR debate? The Quarterly Review of Economics and Finance, 50, 234-239.
Baldwin, R. H. (1959). How to assess investment proposals. Harvard Business Review, 37 (3), 98-104.
Biondi, Y. (2006). The double emergence of the modified internal rate of return: The neglected financial work of Duvillard (1755 - 1832) in a comparative perspective. The European. Journal of the History of Economic Thought, 13 (3), 311-335.
Quiry, P., Dallocchio, M., LeFur, Y., and Salvi, A. (2005). Corporate Finance: Theory and Practice, (6th Ed). John Wiley & Sons Ltd.
Lifland, S. (2015). A Dynamic Model for the Valuation of a Capital Investment: The Use of a Monte Carlo Simulation and the Stratification of the Modified Internal Rate of Return Within a European Put Option Strategy. Journal of Accounting and Finance, 15 (7), 64-78
Erményi, S. (2015). Evaluating Investment Profitability and Business Controlling Methods. Management, Enterprise and Benchmarking in the 21st Century, Budapest, Hungary.
Ryan, P. A., & Ryan, G. P. (2002). Investment practices of the Fortune 1000: How have things changed?. Journal of Business and Management, 8 (4), 355-364.
Ross, A, S., Westerfield, R, W., and Jordan, B, D. (2010). Fundamental of Corporate Finance. The McGraw-Hill Companies, Inc.
Isa, M. M. and Hong, K, T. (1997). The Announcement Effects of Rights and Bonus Issues on Malaysian Stock Prices. Capital Markets Review, 5 (2), 45-58.
Dhar, D. and Ghhaochharia, S. (2008), Market Reaction Around the Stock Splits and Bonus Issues: Some Indian Evidence. Social Science Research Network, available at: http://dx.doi.org/10.2139/ssrn.1087200
Mehndiratta, N. and Gupta, S. (2010). Impact of dividend announcement on stock prices. International Journal of Information Technology and Knowledge Management, 2 (2), 405-410.
Ray, K. K. (2011). Market reaction to bonus issue and stock splits in India: An empirical study. The IUP Journal of Applied Finance, 17 (1), 54-69.
Ghatak, A. (2011). Capital market reaction around the stock splits and bonus issues: Evidence from some Indian IT stocks. Research Journal of Social Science and management, 1 (5), 191-213.
Bhuvaneshwari, D. and Ramya, K. (2014). Impact of stock split announceme26nt on stock prices. International Journal of Management, 5 (3), 36-46.
Alex, D. (2017). Analysis of Market Reaction Around the Bonus Issues in Indian Market. Journal of Economics and Sustainable Development, 8 (1), 28-35.
Murray, D. (1985). Further Evidence on the Liquidity effects of Stock Splits and Stock Dividends. Journal of Financial Research, 8 (1), 59-67.
Lakonishok, J. and Lev, B. (1987), Stock Split and Stock Dividends: Why, Who and When. Journal of finance, 42 (4), 913–932.
Lamoureux, C. G., and Poon, P. (1989). The Market Reaction to Stock Split, Journal of Finance, 42 (5), 1347–1370.
Srividya, V. (1999). The Impact of Bonus and Rights Issues on Stock Returns in India, Ph.D. thesis, Department of Commerce, Bharathiar University, India, http://hdl.handle.net/10603/101682.
Carrel, L., (2010). Dividend Stocks For Dummies. Wiley Publishing, Inc.
Kellison, S, G. (2009). The Theory of Interest. (3rd Ed). McGraw Hill Education.