FIN222 Lecture Notes - Lecture 4: Total Return, Hybrid Security, Retention Rate
Document Summary
Fin222 - review lecture 04: type of shares: a. + right to share proportionally in asset remaining after debts have been paid. + right to vote on directors and other proposals. Most commonly traded security in australia. b. = all previously missed preference dividends must be paid before any ordinary dividends. Hybrid security featuring both debt and equity: Can be perpetual: dividend-discount model: a. 1 + re (with re: equity cost of capital = cost of equity) If current share price < p0 (means the cost would be less than the present value of the benefit) b. dividend-discount model equation: Doesn"t assume any specific pattern for future dividends. Doesn"t assume when the stock is going to be sold: types of dividends: a. zero-growth dividend model. = dividend payment remain constant over time (because g = 0) b. Example: a company has current earnings of per share.
