BUSI 2504 Study Guide - Ticker Tape, Investment, Dividend Yield

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Lo1 how stock prices depend on future dividends and dividend growth. Lo2 the characteristics of common and preferred stocks. Lo3 the different ways corporate directors are elected to office. Lo4: the stock market quotations and the basics of stock market reporting. Answers to concepts review and critical thinking questions. 8. (lo1) investors believe the company will eventually start paying dividends (or be sold to another company). (lo1) the general method for valuing a share of stock is to find the present value of all expected future dividends. The dividend growth model presented in the text is only valid (i) if dividends are expected to occur forever, that is, the stock provides dividends in perpetuity, and (ii) if a constant growth rate of dividends occurs forever. A violation of the first assumption might be a company that is expected to cease operations and dissolve itself some finite number of years from now.