Study your flashcards anywhere!

Download the official Cram app for free >

  • Shuffle
    Toggle On
    Toggle Off
  • Alphabetize
    Toggle On
    Toggle Off
  • Front First
    Toggle On
    Toggle Off
  • Both Sides
    Toggle On
    Toggle Off
  • Read
    Toggle On
    Toggle Off

How to study your flashcards.

Right/Left arrow keys: Navigate between flashcards.right arrow keyleft arrow key

Up/Down arrow keys: Flip the card between the front and back.down keyup key

H key: Show hint (3rd side).h key

A key: Read text to speech.a key


Play button


Play button




Click to flip

42 Cards in this Set

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