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42 Cards in this Set
- Front
- Back
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2 sources of income in stock
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1.dividend income
2.anticipated growth |
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how are corporate directors elected
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from the stock holders
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how long do common and preferred stock last
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forever
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what is the price of the stock
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present value of all future dividends
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what happens to the price you would pay for stock ever year
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stays the same
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constanst dividend
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stays same every year forever
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constant dividend growth
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increase dividend by constant % each year
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supernormal growth
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dividend is not consisnt initially, but settles to constant eventually
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constant growth or zero growth rate
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like preferred stock and perpetuity....dividend/RR
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dividend growth model
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next expected dividend/(rr-expeced growth rate)
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required rate formula
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divididend yield(D1/P*)+capital gains
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capital gains
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rr-dividend yild = capital gains(g)...what its expected to grow at
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features of common stock
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-voting rights
-proxing voting -classes of stock |
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are dividends of common stock tax deductible
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No....not tax deduct
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when are dividends a liability of common
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when there declared by the board
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cumualtive voting
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stockholder may cast all votes for 1 memeber of the board of directors
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straight voting
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stockers cast all votes for each member of board of directors
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dealer
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buys/sells securites from inventory
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broker
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arranges security transactions among investors
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member
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owner of one seat in NYSE
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whats most reliable way to anaylze business investment decesions
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NPVd
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capital assest investments
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look at IRR should be positive
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what do you compare IRR to
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RR
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what is PI good for
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comparing projects wide ranges of products
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difference b/t market value of a project and a cost
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NPV
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when NPV = 0 and when positive
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equal to the discount rate....accept project for both
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payback period
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accept when less the present limit...msut be manageable
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advan/disadvan of payback
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a-easy
d-ignore tvm, biased to long term projects |
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most important alternative to NPV
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IRR
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what is IRR and when to accept
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makes NPV = 0...accpet when greater or equal than required rate
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weighted average cost of capital
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required rate
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non-conventional cash flows
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cash flow signs change more than once
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mutually exclusive projects
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taking one investment prevents taking another
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PI measures?
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benefit per unit cost based on tvm....good for alot of different projects...we want pi= greater than 1
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disadvantages of IRR
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1.non-convential cash flows(more than one situation where npv =0)
2.mutually exclusive agreements |
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calculate PI, payback, npv, irr
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pi= pv of cash flows/ cost
payabck = cost/ cash flows npv= pv of all cash flows - cost irr= pv:cost ; fv:0 ; n:yrs ; pmt:cash flow ; cpt:i/y |
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incremental cash flow analysis
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the results of additional action
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preffered stock(perpetuity)
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price/rate
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pro-forma financial staments
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balance and income statements for sometime in the future....use to help assets that are going to expand for new product
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what cash flows should appear in capital budgeting
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only ones that will occur if project is accpeted....will it only occur if we accept the project?
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OCF
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ebit + depriciation - taxes
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cash flow from assets CFFA
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ocf-net capital - net working captial
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