Chapter 9 The analysis of Competitive Markets

Chapter 9 The analysis of Competitive Markets - Stock...

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1 Chapter 9 Stock Valuation Stock Valuation • The market for stock that is just being offered to the public is called the initial public offering (IPO) market. • The value of a share of stock is calculated as the present value of the stream of dividends the stock is expected to provide in the future. The value of a constant growth stock • The equation used to find the value of a constant growth stock is • The expected rate of return on a constant growth stock can be expressed as follows: A zero growth stock is one whose future dividends are not expected to grow at all • While a supernormal growth stock is one whose earnings and dividends are expected to grow much faster than the economy as a whole over some specified time period and then to grow at the normal rate
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2 Levels of Market Efficiency Weak-Form Efficiency – All information contained in past price movements is fully reflected in current market prices. Semistrong -Form Efficiency
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Chapter 9 The analysis of Competitive Markets - Stock...

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