chap_07 - Chapter 7 EQUITY MARKETS AND STOCK VALUATION...

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Chapter 7 EQUITY MARKETS AND STOCK VALUATION SLIDES CHAPTER WEB SITES Web sites may be referenced more than once in a chapter. This table just includes the section for the first reference. Chapter Section Web Address 7.1 www.yahoo.com www.dividenddiscountmodel.com 7.3 www.nyse.com money.cnn.com 7.1 Key Concepts and Skills 7.2 Chapter Outline 7.3 Cash Flows to Stockholders 7.4 One Period Example 7.5 Two Period Example 7.6 Three Period Example 7.7 Developing The Model 7.8 Estimating Dividends: Special Cases 7.9 Zero Growth 7.10 Dividend Growth Model 7.11 DGM – Example 1 7.12 DGM – Example 2 7.13 Stock Price Sensitivity to Dividend Growth, g 7.14 Stock Price Sensitivity to Required Return, R 7.15 Example 7.3 Gordon Growth Company – I 7.16 Example 7.3 Gordon Growth Company – II 7.17 Nonconstant Growth Problem Statement 7.18 Nonconstant Growth – Example Solution 7.19 Quick Quiz – Part 1 7.20 Using the DGM to Find R 7.21 Finding the Required Return – Example 7.22 Table 7.1 – Summary of Stock Valuation 7.23 Features of Common Stock 7.24 Dividend Characteristics 7.25 Features of Preferred Stock 7.26 Stock Market 7.27 Reading Stock Quotes 7.28 Example: Work the Web 7.29 Quick Quiz – Part 2
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A-81 EQUITY MARKETS AND STOCK VALUATION Chapter Section Web Address www.nasdaq.com CHAPTER WEB SITES – CONTINUED Chapter Section Web Address 7.3 www.island.com finance.yahoo.com CHAPTER ORGANIZATION 7.1 Common Stock Valuation Cash Flows Some Special Cases Components of the Required Return 7.2 Some Features of Common and Preferred Stocks Common Stock Features Preferred Stock Features 7.3 The Stock Markets Dealers and Brokers Organization of the NYSE Nasdaq Operations Stock Market Reporting ANNOTATED CHAPTER OUTLINE Slide 7.1 Key Concepts and Skills Slide 7.2 Chapter Outline 7.1. Common Stock Valuation .A Cash Flows Stock valuation is more difficult than bond valuation because the cash flows are uncertain, the life is forever and the required rate of return is unobservable. The cash flows to stockholders consist of dividends plus a future sale price. However, the future sale price depends on the dividends paid after that point. Therefore, you can illustrate that the current stock price is ultimately the present value of all expected future dividends: P 0 = D 1 /(1+R) + D 2 /(1+R) 2 + D 3 /(1+R) 3 + …
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CHAPTER 7 A-82 Slide 7.3 Cash Flow to Stockholders Slide 7.4 One Period Example Slide 7.5 Two Period Example Slide 7.6 Three Period Example Slide 7.7 Developing the Model Ethics Note, page 196: The importance of the components of the valuation model can be brought into sharp focus with a discussion of pension funding decisions. Pension and Investments reports that in November, 1993 the Securities and Exchange Commission issued a “new, unprecedented warning …to use only ‘high-grade’ market rates for discounting” in order to value pension assets. The article reports that many over-funded plans could “slip into underfunded status.” A practical result of the use of inappropriate return
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chap_07 - Chapter 7 EQUITY MARKETS AND STOCK VALUATION...

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