What is Zero growth stock and how do you calculate its PV
Dividends remain same forever, Perpetuity PV = Div0 / R
1 of 13
What is Constant growth stock and how do you calculate its PV
Dividends grow constantly at g, Growing perpetuity PV=Div1/R-g
2 of 13
What is Differential growth stock and how do you calculate its PV
Dividends grow at different rates in the foreseeable future and then at a constant rate thereafter
3 of 13
How do you estimate g
g=Retention rate x ROE
4 of 13
How do you estimate R
R=
5 of 13
How do you estimate Total Payout
P =
6 of 13
How is the price of stock calculated if there are growth opportunities
P=
7 of 13
To grow a firm must;
Not payout all earnings as dividends; Invest in projects with positive NPV
8 of 13
How is P/E ratio calculated
Price per Share/ Earnings per Share
9 of 13
Why do some firms have higher P/E than others
High growth opps = Higher P/E
10 of 13
How do accounting principles affect P/E
o Conservative have higher P/E
11 of 13
What do common stock feature
Voting Rights, Proxy Voting, Classes of Stocks, Pre-emptive Right
12 of 13
What do preferred stock feature
Dividends must be paid before dividends paid to common stockholders, Most are cumulative, must be paid before common dividends, however can be deferred (not a liability)
13 of 13
Other cards in this set
Card 2
Front
What is Constant growth stock and how do you calculate its PV
Back
Dividends grow constantly at g, Growing perpetuity PV=Div1/R-g
Card 3
Front
What is Differential growth stock and how do you calculate its PV
Comments
No comments have yet been made