Explain the various methods of stock valuation theory

Reference no: EM1315689

Various methods of Stock Valuation theory and dividend policies.

1. Stock Valuation: Why does the value of a share of stock depend on dividends?

2. Stock Valuation: A substantial percentage of the companies listed on the NYSE and NASDAQ don't pay dividends, but investors are nonetheless willing to buy shares in them. How is this given your answer to the previous questions?

3. Dividend Policy: Referring to the previous questions, under what circumstances might a company choose not to pay dividends?

4. Dividend Growth Model: Under what two assumptions can we use the dividend growth model presented in the chapter to determine the value of a share of stock? Comment on the reasonableness of these assumptions

5. Common versus Preferred Stock: Suppose a company has a preferred stock issue and a common stock issue .Both have just paid a $2 dividend. Which do you think will have a higher price, a share of preferred or a share of the common.

6. Dividend Growth Model: Based on the dividend growth model, what are the two components of the total return of a stock? Which do you think is typically larger?

7. In the context of the dividend growth model, is it true that the growth rate in dividends and growth rate in the price of stock are identical.

8. When it comes to voting in elections, what are the differences between U.S. political democracy and U.S. corporate democracy?

9. Corporate Ethics: Is it unfair or unethical for corporations to create classes of stock with unequal voting rights?

10. Voting Rights: Some companies such as reader's digest have created classes of stock with no voting rights at all. Why would investors buy such stock?

Reference no: EM1315689

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