Stocks+-+All+stu

Stocks+-+All+stu - Valuation of Financial Assets - Equity...

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Valuation of Financial Assets - Equity (Stock) Common stock Preferred stock hybrid similar to bonds with fixed dividend amounts similar to common stock as dividends are not required and have no fixed maturity date Always perpetual preferred, so use perpetuity formula 1
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Stock Valuation Models Terms: Expected Dividends D 0 – most recent dividend paid; last dividend paid; paid at t = 0 D 1 – dividend paid at t = 1 D n – dividend paid at t = n We suggest that we never sell a stock, so all the cash flows are ALL future dividends, to infinity 2
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Stock Valuation Models Terms: Market Price 3 ay market tod in the sells stock a at which price the P 0 P n = the price at which a stock sells in the market at t = n
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Stock Valuation Models Terms: Intrinsic Value (Price we calculate) 4 both or value, book its price, market current s asset' the from different be may and facts the by justified is investor, an of mind the in that, asset an of value the P ˆ 0
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Stock Valuation Models Terms: Growth Rate 5 g the expected rate of change in dividends per share Can be + or -
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Stock Valuation Models Terms: Required Rate of Return 6 s investment other on available returns and riskiness its given , acceptable consider rs stockholde that stock common a on return of rate minimum the k s k = i = r
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Stock Valuation Models Terms: Dividend Yield (D
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This note was uploaded on 03/18/2012 for the course FIN 301 taught by Professor Schaeff during the Spring '08 term at Miami University.

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Stocks+-+All+stu - Valuation of Financial Assets - Equity...

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