Day 15-Ch 7 & Personal Finance II-10.24.11

Day 15-Ch 7 & Personal Finance II-10.24.11 -...

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Unformatted text preview: Business Management 201 Day 15 Chapter 7: Stock Valuation Personal Finance II October 24, 2011 Day 15 Agenda 1) Ch 11 Reading Quiz Due Wednesday, Oct 26 8:00 AM 2) POW Quiz #7: Personal Finance Goals & PlanDue Friday, October 28 at 11:59 PM 3) Course Survey due Wednesday, Oct 26 4) Midterm Exam Discussion on Wednesday 5) TA Review Sessions this Week Will Discuss Midterm: TA Open Lab SessionTuesday 2:00 PM-3:00 PM in 251 TNRB TA Open Lab SessionThursday 11:00 AM-12:00 PM in 3108 JKB TA Open Lab SessionFriday 11:00 AM-1:00 PM in 184 TNRB TA Review SessionTuesday 7:00 PM-8:00 PM in 3108 JKB TA Review SessionThursday 5:00 PM-6:00 PM in 3714 HBLL 1) Chapter 7: Stock Valuation 2) Personal Finance I Chapter 7: Chapter 7: Stock Valuation Stock Valuation Mind Map Why?: Common stock (aka common equity) represents ownership in a firm. As such, common stock holders have a residual claim on the earnings and assets of the firm. In this section, we discuss the basic models used to value equity. This is sometimes difficult given the uncertainty associated with equity cash flows. Mind Map Learning Objectives: Calculate the value of common and preferred stock with the basic valuation models, including: Single-Period Model Constant Growth Model Two-Stage Model Mind Map Key Words/Concepts: Preferred Stock Common Stock Dividend Discount Model Constant Growth Model [aka Gordon Growth] Two-Stage Model Stock Valuation The intrinsic value of an asset = the present value of the stream of expected cash flows discounted at an appropriate required rate of return . Does this sound familiar? (Recall our discussion of bond valuation.) Preferred Preferred Stock Stock Preferred Stock Hybrid Security : 1) Its like common stock: no fixed maturity . Technically, its part of equity capital. 2) Its like debt: preferred dividends are fixed . Missing a preferred dividend does not constitute default, but preferred dividends are usually cumulative . Usually sold for $25 , $50 , or $100 per share par value. Dividends are fixed and often quoted as a percentage of par. Example: In 1988, Xerox issued $75 million of 8.25% preferred stock at $50 per share. Fixed Annual Dividend Per Share: $4.125 ($50 x 0.0825=$4.125) Preferred Stock Preferred Stock is usually non-voting and non- participating ....
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This note was uploaded on 01/06/2012 for the course BUS M 201-1 taught by Professor Jennlarson during the Fall '11 term at BYU.

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Day 15-Ch 7 & Personal Finance II-10.24.11 -...

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