Topic04_valu_stock[1]

Topic04_valu_stock[1 - Thomas Moeller FINA 30153 Financial Management Topic 4 Stock valuation Objectives 1 Understand stock characteristics 2

Info iconThis preview shows pages 1–5. Sign up to view the full content.

View Full Document Right Arrow Icon
Thomas Moeller FINA 30153: Financial Management 1 Topic 4 Stock valuation Objectives 1. Understand stock characteristics 2. Determine the value of a stock 3. Estimate the capitalization rate 4. Understand the concept of present value of growth opportunities (PVGO)
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Thomas Moeller FINA 30153: Financial Management 2 1. Stock Characteristics Features of common stocks: - Common stockholders: a) are the owners of the corporation b) have a residual claim on the assets and proceeds of the firm c) have limited liability d) have the right to vote on major matters affecting the firm f) may receive dividends (however, no law compels firms to pay dividends.)
Background image of page 2
Thomas Moeller FINA 30153: Financial Management 3 Features of preferred stocks: - A hybrid form of financing, combining features of debt and common stock. - Occupies a middle position between bonds and common stocks both in terms of priority of payment of income and in case the firm is liquidated. - It pays dividends, which are specified and known in advance. Preferred stock dividends are discretionary and are often stated as a percentage of par value. - Most preferred stocks are cumulative. If the firm omits any dividend, it must pay it later. - Preferred stockholders have no right to vote unless the company is unable to pay dividends during a specified period.
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Thomas Moeller FINA 30153: Financial Management 4 - Preferred stock dividends are also subject to double taxation. However, if a corporation buys another’s preferred stock, only 30% of the dividends received are treated as taxable income. Definitions:
Background image of page 4
Image of page 5
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 04/21/2008 for the course FINA 30153 taught by Professor Moeller during the Spring '08 term at TCU.

Page1 / 18

Topic04_valu_stock[1 - Thomas Moeller FINA 30153 Financial Management Topic 4 Stock valuation Objectives 1 Understand stock characteristics 2

This preview shows document pages 1 - 5. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online