finance ch8-11
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9 Terms
preferred stock
similar to common stock in that it has no fixed maturity date, the nonpayment of dividends does not bring on bankruptcy, and dividends are not deductible for tax purposes. & similar to bonds in that dividends are stated as a percent of par value and limited to the contractually stated amount.
common stock
shares that represent ownership in a corporation.
proxy
a means of voting in which a designated party is provided with the temporary power to vote for the signee at the corporation’s annual meeting.
preemptive right
the right entitling the common shareholder to maintain his or her proportionate share of ownership in the firm
dividend payout ratio
dividends as a percentage of earnings
value of a stock
the present value of the future cash flows
expected return
the return that an investor expects to earn on an asset, given its price, growth potential, etc
required return
the return that an investor requires on an asset given its risk and market interest rates
constant growth model
assumes common stock dividends will grow at a constant rate into the future