FNCE chapter 7- Stock valuation Flashcards
cumulative dividends
a protective feature on preferred stock that requires preferred dividends previously not paid to be disbursed before any common stock dividends can be paid
income stocks
stocks of firms that traditionally pay large, relatively constant dividends each year
growth stocks
stocks that generally pay little or no dividends
proxy
a document giving one person the authority to act for another
Yankee stock
stock issued by foreign companies and traded in the USA
intrinsic value, P^o
the value of an asset
growth rate, g
the expected rate of change in dividends per share
required rate of return, r
the minimum rate of return that stockholders consider acceptable on a common stock
dividend yield
the expected dividend divided by the current price of a share of stock
capital gains yield
the change of price during a given year divided by the price at the beginning of the year
expected rate of return, r
the rate of return that an individual stockholder expects to receive on a common stock
constant growth model
used to find the value of a stock that is expected to experience constant growth
the current value of a stock is based on
the stream of dividends the investors expect the firm to pay during its life
types of equity (stock)
preferred stock
common stock
convertibility
preferred stock that can be converted to common stock at the option of the investor
