COMM-2026EL Chapter Notes - Chapter 8: Double Taxation, Listing Rules, Proxy Fight

• School: Laurentian
• Department: Commerce and Administration
• Course: COMM-2026EL
• Professor: Abukari

Document Summary

The current price of the stock can be written as the present value of all the future dividends (cid:4666)1+(cid:1870)(cid:4667)(cid:2869)+ (cid:1830)(cid:2870) (cid:1842)(cid:2868)= (cid:1830)(cid:2869) (cid:4666)1+(cid:1870)(cid:4667)(cid:2870)+ (cid:1830)(cid:2871) (cid:4666)1+(cid:1870)(cid:4667)(cid:2871)+ . D = cash dividend paid at the end of the period r = required return. There are a few useful special circumstances where we can come up with a value for the stock. What we have to do is make some simplifying assumptions about the pattern of future dividends. The 3 cases we consider are: zero growth. A share of common stock in a company with a constant divided is much like a share of preferred stock. Since the dividend is always the same, the stock can be viewed as an ordinary perpetuity with a cash flow equal to d every period the per-share value is thus given by: (cid:1830)(cid:2869)= (cid:1830)(cid:2870)= (cid:1830)(cid:2871)=(cid:1830)=(cid:1867)(cid:1866)(cid:1871)(cid:1872)(cid:1866)(cid:1872) (cid:1842)(cid:2868)=(cid:1830)(cid:1870) East coast company has a policy of paying a per-share dividend every year. /0. 20 = per share: constant growth.