FIN 300 stock Valuation exam 2 - FIN 300 Stock Valuation...

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FIN 300 Stock Valuation
Stock Valuation Value of a share of CS = PV of future cash flows= PV dividends + PV(future price)
Rights of the common stockholder:1) Voting - elect the board of directors (proxy)2) Pre-emptive right3) Liquidation value4) Dividends
Preferred stock is considered a “hybrid”security with some of the following features:1. Cumulative-all dividends in arrears must be paid beforeany common stock dividend can be paid 2. Participating-the preferred stockholder may share in anextra or bonus dividend with the common stockholder 3. Callable-the firm can notify the stockholder and forcethem to sell back the stock (retire the stock) 4. Convertible-the preferredstockholder may convert their preferred stock into a specified number of common stock shares 5. Terms-the dividend is usually fixed and based on par

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