BUSI 2504 Lecture Notes - Dividend Yield, Preferred Stock

108 views3 pages

Document Summary

If you have a share of stock, you can receive cash in two ways: the company pays dividends, you sell your shares, either to another investor in the market or back to the company. As with bond price of stock is the pv (present value) of these expected cash flows. Stock is more difficult to value in practice than bond: Not even the promised cash flows are known in advance. Life of investment is forever (no maturity). No way to easily observe the rate of return that market requires. The firm will pay constant dividends forever. The firm will increase the dividend by a constant % every period. Dividend growth is not consistent initially, but settles down to constant growth eventually. Share proportionally in remaining assets during liquidation. Presumptive right- first shot at new stock issue to maintain proportional ownership if desired. Right to vote on shareholders matter of great importance such as merger etc.

Get access

Grade+20% off
$8 USD/m$10 USD/m
Billed $96 USD annually
Grade+
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
40 Verified Answers
Class+
$8 USD/m
Billed $96 USD annually
Class+
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
30 Verified Answers

Related Documents