busi408 2.2 - Note it is important that “n” and “i”...

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2/2 Chapter 5 Organizing a Business Sole Proprietorship Partnership Corporation Who ones the business Manager Partners Shareholders Are managers and owners No No Usually Separate What is the owner's liability Unlimited Unlimited Limited Are owners and the business taxed separately? Bonds are IOUS In return for an upfront payment, you receive a promise to receive certain fixed payments into the future Essential components of a bond Maturituty Frequency of payment Zero coupon bonds Ony payment made at maturity of the bond Coupon bonds Payment made at maturity plus bondholder receives regular payments called coupons Modt bonds pay coupons semi annually, some pay annually Face Value Coupon Rate Bonds Stock A share of ownership in a corporation Ordinary Annuities An annuity is a series of equal dollar
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Unformatted text preview: Note, it is important that “n” and “i” match. If periods are expressed in terms of number of monthly payments, the interest rate must be monthly. A perpetuity is an annuity that continues forever of has no maturity. Growing perpetuity Level perpetuity: stay the same Higher risk, use higher discount rate NPV= -C0+C1/(1+R) IRR,set NPV=0 Bond Price= PV OF INTEREST PAYMENT AND PRINCIPAL OF FACE VALUE BOND YIELD=IRR of Bond The price of a stock is the present value of future stream of dividends High growth, stock price will be higher R is lower, the stock is not as risky as others, stock price will be higher. P5—beyonds dividends 5 high growth—high p/e multiple. high risk—low p/e multiple. Don't use taining multiple...
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This note was uploaded on 05/10/2011 for the course BUSI 408 taught by Professor Zeighamkhokher during the Spring '11 term at University of North Carolina School of the Arts.

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busi408 2.2 - Note it is important that “n” and “i”...

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