Valuing a Company Flashcards
1
Q
What determines the investor’s rate of return in a stock?
A
Purchase Price, Dividends and Selling Price
2
Q
Price of the stock today….
A
is the function of the sum of the dividends that the stock will pay in the future
3
Q
What’s the main driving force that determines company’s dividends?
A
Cash Flow Generation
4
Q
What is a cash flow..
A
the money that the company makes
5
Q
Operating Cash Flow =
A
Revenue - Cost - Investments
6
Q
What are the two value that drive firm’s value
A
future Growth and Profitability
7
Q
What’s time value of money
A
A dollar today is worth more than the dollar tomorrow. Money you hold now is worth more, because you can invest it and earn interest and returns
8
Q
What’s CAPM?
A
Capital Asset Pricing Model - to calculate the cost of equity
