Estimating lost yield- Stock Repurchase model
Hi Everyone,
I am attempting to recreate a stock repurchase model I was researching from a sell side report. Fro my understanding, the inputs required go like this:
- Estimate future cash, Net income, dividend payout
- Estimate Net (post-tax) cash yield, given the historical interest income and outlook for rates in the future;
- Estimate a % of opening net income that might be used for repurchases this year. This gives us the cash invested. This is then used to estimate the cash yield lost.
I am facing issues in forecasting the cash yield 'lost' (i.e., foregone). Could anyone please advise a methodology acceptable as a best practice? there seem to be a few options to do that:
1. Current year net yield * (average of opening & closing year cumulative cash invested)
2. Current year net yield * ( cumulative cash invested)
3. Last year's lost interest income + Current year net yield * Current year cash used for repurchase
Many thanks in advance. I could point out to a model as well if required.
