{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

Chapter09 - Chapter 9 Stocks and Their Valuation Learning...

Info icon This preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
Chapter 9 Stocks and Their Valuation Learning Objectives After reading this chapter, students should be able to: Identify some of the more important rights that come with stock ownership and define the following terms:  proxy, proxy fight, takeover, and preemptive right. Briefly explain why classified stock might be used by a corporation and what founders’ shares are. Determine the value of a share of common stock when:  (1) dividends are expected to grow at some constant rate, (2) dividends are expected to remain constant (zero growth), and (3) dividends are expected to grow at some supernormal, or nonconstant, growth rate. Calculate the expected rate of return on a constant growth stock. Apply the total company (corporate valuation) model to value a firm in situations where future dividends are not easily predictable. Explain why a stock’s intrinsic value might differ between the total company model and the dividend growth model. Explain the following terms:  equilibrium and marginal investor. Identify the two related conditions that must hold in equilibrium. Explain how changes in the risk-free rate, the market risk premium, the stock’s beta, and the expected growth rate impact equilibrium stock price. Explain the reasons for investing in international stocks and identify the “bets” an investor is making when he does invest overseas. Define preferred stock, determine the value of a share of preferred stock, or given its value, calculate its expected return. Chapter 9:  Stocks and Their Valuation Learning Objectives 213
Image of page 1

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Lecture Suggestions This chapter provides important and useful information on common and preferred stocks.  Moreover, the valuation of stocks reinforces the concepts covered in Chapters 2, 7, and 8, so Chapter 9 extends and reinforces concepts discussed in those chapters. We begin our lecture with a discussion of the characteristics of common stocks and how stocks are valued in the market. Models are presented for valuing constant growth stocks, zero growth stocks, and nonconstant growth stocks. We conclude the lecture with a discussion of preferred stocks. What we cover, and the way we cover it, can be seen by scanning the slides and Integrated Case solution for Chapter 9, which appears at the end of this chapter solution.  For other suggestions about the lecture, please see the “Lecture Suggestions” in Chapter 2, where we describe how we conduct our classes.
Image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern