311 ch8 - Characteristics, Valuation and Issuance Common...

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Common Stock: Characteristics, Valuation and Issuance Chapter 8
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Common Stock Common Stock (C/S) is the permanent long-term financing of the company Preferred Stock is also permanent Common Stock is not callable Common Stock represents the true residual ownership of the firm
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Stock Quotations Some relevant information about stocks is available in the newspaper each day Yld% is the dividend yield – how much return is earned by receiving dividends Div Yield = Dividend / Current Price 52 Weeks Yld Vol Net Hi Lo Stock SYM DIV % PE 100s Hi Lo Close Chg 75 3 / 1 6 50 1 / 1 6 Du Pont DD 1.40 2.0 18 52104 71 13 / 16 70 70 11 / 16 -1 3 / 8 92 73 1 / 2 Du Pont pfB 4.50 5.8 --- 52 78 1 / 4 77 77 -1
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C/S Balance Sheet Accounts Par Value Used to be used in liquidations Usually a low amount (< $5 / share) Contributed capital in excess of par If shares are sold for more than par value, additional proceeds are included in this account Retained Earnings (R/E) These accounts combine to make up the book value of equity Can get book value per share by dividing by the total number of shares outstanding
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Rights of Common Stockholders Dividend Rights Asset Rights Preemptive Rights Allows owners to avoid dilution of their position Not all common stock carries preemptive rights Voting Rights Voting power may be split between different classes of common stock Some classes of common stock may be specifically nonvoting
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Voting Power Majority Voting Like political elections Requires >50% to guarantee selection of a director
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This note was uploaded on 04/08/2008 for the course FINANCE fin taught by Professor Bradley during the Spring '08 term at Clemson.

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311 ch8 - Characteristics, Valuation and Issuance Common...

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