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financeexam2 - Chapter 8 Cash Flows P0 =(D1 P1(1 R Zero...

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Chapter 8 Cash Flows P 0 = (D 1 + P 1 )/(1+R) Zero Growth P 0 = D/R Constant Growth D t = D 0 * (1+g) t 1. growing perpetuity – an asset with cash flows that grow at a constant rate Dividend Growth Model P 0 = [D 0 * (1+g)]/(R-g) = D 1 /(R-g) Required Return R = (D 1 /P 0 ) + g Dividend yield – D 1 /P 0 Capital gains yield – g Common Stock Features 2. common stock – stock that has no special preference either in receiving dividends or in bankruptcy 3. golden rule – whosoever has the gold makes the rules 4. cumulative voting – the total number of votes that each shareholder may cast is determined usually by the number of shares owned or controlled multiplied by the number of directors to be elected, and the directors are elected all at once 5. minority participation – participation by shareholders with relatively small amounts of stock 1/(N + 1) = the percent of stock plus one share that will guarantee you a seat if N directors are up for election 6. straight voting – the directors are elected one at a time 7. proxy – the grant of authority by a shareholder to someone else to vote his or her shares 8. proxy fight – trying to replace management by getting people to proxy their votes to another group
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9. preemptive right – stockholders sometimes have the right to share proportionally in any new stock sold 10. dividends – represent a return on the capital directly or indirectly contributed to the corporation by shareholders Preferred Stock 11. preferred stock – differs from common stock because it has preference over common stock in the payment of dividends and in the distribution of corporation assets in the event of liquidation 12. preference – means only that the holders of preferred shares must receive a dividend before holders of common shares are entitled to anything 13.arrearage – if preferred dividends are cumulative and aren’t paid in a particular year, they are carried forward as this
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financeexam2 - Chapter 8 Cash Flows P0 =(D1 P1(1 R Zero...

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