Stock Valuation - Ch. 8
features of common stock
it has no special preference in receiving dividends it generally has voting rights it has no special preference in bankruptcy
P1 D1 R P0
price in one year dividend in one year discount rate price today
The 3 special cases patterns of dividend growth
non-constant growth constant growth zero growth
the formula for valuing a constant growth stock
p0=D1/(R-g)
Initial public offers of stock occur in the ______ market.
primary
in the dividend discount model, the expected return for investors comes from which two sources?
growth rate and dividend yield
a benchmark PE ratio can be determined by:
a company's own historical PEs the PEs of similar companies
what are expected cash flows to investors in stocks
capital gains dividends
All else constant, the dividend yield will increase if the stock price ______
decreases
preferred stock has preference over common stock in the:
distribution of corporate assets & payment of dividends
what represents the valuation of stock using a zero-growth model
dividends/discount rate
a PE ratio that is based on estimated future earnings is known as a
forward PE ratio
if the growth rate (g) is zero, the capital gains yield is _____
zero
