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BUAD 3040 valuation oc corporate securities

BUAD 3040 valuation oc corporate securities - risk The...

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For most preferred stock the dividends remain constant making cash flows easy to estimate. Market value=dividend/required return Required return o market value o Pn=[the dividend in period * (dividend growth rate +1)] / [required return-dividend growth rate] Higher growth can result from riskier investment or financing policies, increasing the required return. Many corporations have restructured to reduce costs, raising profits without changing stockholder
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Unformatted text preview: risk. The growth rate cannot be higher than the required return. Required return=dividend yield +capital gain Dividend yield=dividend / market value o Capital gain = dividend growth rate Changes in the required return obviously have a major influence on stock values....
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