Chapter 6 - Equity

Question 1

What is a Share

Answer 1

Method of financing a firms assets, a firm gives up a section of ownership in exchange for money

Question 2

What is a dividend

Answer 2

a sum of money paid regularly (typically annually) by a company to its shareholders out of its profits (or reserves).

Question 3

How are shares first issued?

Answer 3

An IPO, Initial Public Offering

Question 4

Finding the price of a preference share

Answer 4

PV formula. PV= c/r

Question 5

Finding the dividend at t=1

Answer 5

Dividend x ( 1 + r )

Question 6

rate of Return

Answer 6

D1 ( dividend at year one ) / p ( current value of share ) + g ( growth rate).