ans where - a Describe briefly the legal rights and...

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a. Describe briefly the legal rights and privileges of common stockholders. Answer: The common stockholders are the owners of a corporation, and as such, they have certain rights and privileges as described below. 1. Ownership implies control. Thus, a firm’s common stockholders have the right to elect its firm’s directors, who in turn elect the officers who manage the business. 2. Common stockholders often have the right, called the preemptive right, to purchase any additional shares sold by the firm. In some states, the preemptive right is automatically included in every corporate charter; in others, it is necessary to insert it specifically into the charter. b. 1. Write out a formula that can be used to value any stock, regardless of its dividend pattern. Answer: The value of any stock is the present value of its expected dividend stream: = However, some stocks have dividend growth patterns which allow them to be valued using short-cut formulas.
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b. 2. What is a constant growth stock? How are constant growth stocks valued?
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