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This 0 page Class Notes was uploaded by Domingo Parker on Sunday November 1, 2015. The Class Notes belongs to FIN 3113 at Oklahoma State University taught by Staff in Fall. Since its upload, it has received 38 views. For similar materials see /class/232779/fin-3113-oklahoma-state-university in Finance at Oklahoma State University.
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Date Created: 11/01/15
Chapter 8 Characteristics and Valuation of Common Stocks and Preferred Stocks 1 Common stock 0 True owners of the rm 0 Residual form of ownershipiclaim on earnings and assets is a residual o In exchange for assuming a residual status all the risk they have the potential to earn high rates of returnipotentially limitless o Stockholder rights 0 Dividend rights 0 Asset rights 0 Preemptive rights 0 Voting rights proxy statement 11 Valuation of Common stock 0 Dividend discount modeliconstant dividend growth D1 ke g o Accdg to the above model what are the determinants of the stock price 0 Dividends 0 Growth in dividends 0 Required rate of return which in turn is affected by risk free rate in ation market risk premium risk aversion and systematic risk of stock P0 0 Above model is sometimes expressed in terms of k6 to illustrate the components of return on equity kc g g P0 0 Priceearnings multiple model P0 appropriate PE multiple x earnings per share 0 Enterprise valuation model 0 Bookvalue per share III Preferred stock 0 Features of preferred stock 0 Preferred dividend Adjustable rate preferred dividend Cumulative feature Participation Matuiity Call feature 0 Voting rightsicontingent o Valuationiconventional preferred stock only OOOOO
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