Ch. 7

These flashcards cover key concepts and vocabulary related to equity markets and stock valuation as outlined in Chapter 7 of the lecture notes.

Stock Valuation

The process of determining the current worth of a stock based on expected future cash flows from dividends and growth.

Dividend

A portion of a company's earnings distributed to shareholders, usually in cash or stock.

Capital Gains

The profit earned from selling a stock at a higher price than its purchase price.

Present Value (PV)

The current worth of a future sum of money or cash flows, discounted at a specific interest rate.

Constant Growth Model

A method of valuing a stock by assuming a constant rate of dividend growth.

Nonconstant Growth

A situation where a company's dividends grow at varying rates over time before settling into a constant growth pattern.

Required Return (R)

The minimum return an investor expects to receive from an investment, given its risk level.

Price-Earnings (PE) Ratio

A valuation ratio calculated by dividing the current share price by the earnings per share.

Perpetuity

A type of financial instrument that provides an indefinite number of cash flows.

Gordon Growth Model

A model used to determine the intrinsic value of a stock based on a future series of dividends that grow at a constant rate.