Stock Valuation - Ch. 8

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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


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