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23 Cards in this Set
- Front
- Back
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What is the value of an asset? |
The present value of an assets expected future cash flows |
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What 2 ways does stock ownership produce cash flow? |
1) dividends 2) capital gains |
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In the constant growth model, what dividend are the calculations based on? |
The next one |
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What 2 things sum to find the value of a stock with differential growth? |
1) a t-year annuity growing at rate x 2) discounted value of a perpetuity growing at rate y, that starts in year T+1 |
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How do you calculate a firms growth rate? |
Retention ratio × return on retained earnings |
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What 2 parts can the discount rate be broken into? |
1) dividend yield 2) growth rate in dividends |
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When estimating the discount rate, what 2 cases call for special scepticism? |
1) stocks not paying dividends 2) stocks with growth rate expected to equal or exceed the discount rate |
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What 2 things does the value of a firm depend on? |
1) growth rate 2) discount rate |
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What can we use to find the discount rate? |
The DGM |
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How do we calculate R according to the DGM? |
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Other than dividends, what's another form of payout by a firm? |
Repurchasing shares |
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How do you calculate total payout %? |
Dividend % + share repurchase % |
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What are 2 common multiples for comparables? |
1) price earnings 2) enterprise value |
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How is a firms PE ratio related to 1) growth opportunities, and 2) risk? |
1) positively 2) negatively |
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What are 2 types of voting rights? |
1) cumulative 2) straight |
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What are 3 features of common stock? |
1) voting rights 2) proxy voting 3) classes of stock (unequal voting rights) |
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What is a preemptive right? |
First shot at new stock issue to maintain proportional ownership of desired |
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What are 4 features of preferred stock? |
1) dividends must be paid before dividend to common stock is paid 2) not a liability to the firm and can be deferred indefinitely 3) most dividends are cumulative 4) generally doesn't have voting rights |
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What does a broker do? |
Bring buyers and sellers together |
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What are 3 features of NASDAQ? |
1) computer based quotation system 2) multiple market makers 3) large portion of technology stocks |
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In a stock price quote, the number of outstanding shares multiplied by the current price is what? |
Market capitalisation |
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What is the primary market? |
When companies raise capital through issuing new shares |
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When a floor broker 'works' an order for a client, they are trying to do what? |
Get their client the best possible price |
