Stock Evaluation paper

645 Words Nov 7th, 2014 3 Pages
Stock Valuation
FIN/571 Corporate Finance
October 25, 2014

Stock Valuation
The purpose of this review is to discuss the “Concept Review Video: Stock Valuation” from the WileyPLUS learning tool for Week 4 of this learning team assignment. Stock valuations allow the projection or prediction of market values for stocks or investments. The determination of these valuations is through the utilization of various methods.
Net Present Value
One approach that investors use to place value on the stock is to look at the Net Present Value from an organization's streams of expected cash flows. It is from this method that the potential investor can determine how the future cash flows will impact the future value of the stock and how it will
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Shareholders of preferred stock receive fixed, regular dividend payments for a specified period of time, unlike the variable dividend payments sometimes offered to common stockholders “(Preferred Stock, 2014). Common stock is slightly more risky however it has the advantages of inflating, unlike preferred stock. Common stock is one form of security issued by a public corporation. The disadvantage to common stock is that preferred stock is paid its dividends first and if the company does not have enough to pay out dividends to common stock it won't. According to "Financial Services of America" (n.d.), “Owners of common stock have “preemptive rights” to maintain the same proportion of ownership in the company over time. If the company circulates another offering of stock, shareholders can purchase as much stock as it takes to keep their ownership comparable” (Common Stock).
Stock Valuation Variances
The video discusses computing dividends. According to the video, there are two variations of dividends; constant and supernormal. Constant is cumulative signifying an ongoing accrual until terminated. Supernormal has various yields, and the accruals are not consistent. Below is an example of supernormal stock valuations:

Conclusion
Common stocks is “…the basic ownership claim in a corporation…preferred stock represents an ownership interest in the corporation, but as the name implies, preferred stock

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