Lecture 8,9,10 StockMktTransactions 2009

Lecture 8,9,10 StockMktTransactions 2009 - Announcements...

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Announcements New Venture Concept Statements are due to be submitted before 12:00 noon this Friday, October 16 You must submit a hard copy (one per group) to the drop boxes outside the TA office, P1002, before 12:00 noon and a soft copy one per group) to Turnitin.com before 12:00 midnight
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Late submissions (either hard copy to the TA office or soft copy to Turnitin.com) are given a grade of zero…so please insure that both submissions are turned in prior to the deadlines Instructions for submitting your soft copy to Turnitin.com are now posted in a folder on the course website entitled “ Turnitin.com”
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Peer evaluations must be submitted before 12:00 noon on October 23 (one week after the submission deadline) to avoid the loss of individual marks See course website file entitled “ Procedures for Submitting Peer Evaluations for Group Projects ” for a full explanation of both the submission procedures and the penalties incurred for late or non submissions
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Features of Some Preferred Shares (continued from last lecture) Participating Feature Once common stock dividends reach a certain prescribed level, and there are still additional profits available to be distributed in the form of dividends, then the common stockholders and preferred stockholders will share equally in the distribution of these additional profits on a per share (pro rata) basis
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Allows preferred stockholders to receive dividends in excess of the stated preferred stock dividend rate in years of exceptional company profitability Favourable to investors
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Participating Preferred Example Example: - $1,000,000 net profit - 50% dividend rate - 50,000 shares of 10% cumulative participating preferreds with $10 par value - dividends in arrears 1 yr. - participation commences when common dividends reach $3/share - 100,000 shares common stock What is the amount of dividends per share for both common and preferred?
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Example: $500,000 total dividend ($1,000,000 x 50%) - $100,000 preferred dividend (10% x $10 par x 2 years = $2/share x 50,000 shares) $400,000 - $300,000 common dividend (100,000 shares x $3) $100,000 for participation / 150,000 shares (50,000 pref. + 100,000 common) ~ $.67 per share Therefore… preferred dividend = $2.67/share common dividend = $3.67/share
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Calculating Stock Yield Stock/ Dividend Yield. .. = dividends/share/year price/share For Example : What is the yield on a stock which is selling for $20/share, and has an expected dividend of $2? Dividend Yield = $2 / $20 = 10%
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Common Stock Common stockholders are the true owners of any organization They bear the greatest levels of risk but also enjoy the greatest potential rewards with regard to both dividends and capital gains when compared to bondholders and preferred stockholders
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Characteristics of Common Stock Voting rights Right to receive dividends Discretionary No fixed amount Dependent upon company profitability Liquidation rights Pre-emptive right
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How Are Common Stock Prices Derived? Bonds and Preferred stock prices are
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Lecture 8,9,10 StockMktTransactions 2009 - Announcements...

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