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] Boundless.com/finance?campaign_content=book_192_ch apter_7&campaign_term=Finance&utm_campaign=power point&utm_medium=direct&utm_source=boundless Stock Valuation Defining Stock Types of Stock Rules and Rights of Common and Preferred Stock Stock Markets Free to share, print, make copies and changes. Get yours at www.boundless.com Stock Valuation

] Boundless.com/finance?campaign_content=book_192_ch apter_7&campaign_term=Finance&utm_campaign=power point&utm_medium=direct&utm_source=boundless Stock Valuation (continued) Valuing the Corporation Free to share, print, make copies and changes. Get yours at www.boundless.com

Ownership Nature of Stock Control and Preemption Defining Stock Stock Valuation > Defining Stock Free to share, print, make copies and changes. Get yours at www.boundless.com www.boundless.com/finance?campaign_content=book_192_chapter_7&campaign_term=Finance&utm_campaign=powerpoint&utm_medium=dire ct&utm_source=boundless

The stock (capital stock) of a company or business entity is equal to the original capital paid into the business by its founders. Stock serves as a security for creditors and investors in the business. While it may fluctuate in value, it is different from the assets and property of a business. A shareholder legally owns share of a stock in a public or private corporation, and has certain rights with regards to the company because of share ownership. Ownership Nature of Stock Free to share, print, make copies and changes. Get yours at www.boundless.com www.boundless.com/finance/textbooks/boundless-finance-textbook/stock-valuation-7/defining-stock-70/ownership-nature-of-stock-319- 3794?campaign_content=book_192_chapter_7&campaign_term=Finance&utm_campaign=powerpoint&utm_medium=direct&utm_source=boundl ess 1903 stock certificate of the Baltimore and Ohio Railroad View on Boundless.com Stock Valuation > Defining Stock

Shareholders gain certain rights with regards to a business entity when purchasing stock. These include being able to sell shares, voting rights and dividends. Shareholders have the right of preemption, meaning they have the first chance at buying newly issued shares of stock before the general public. Even if shareholders do have the option of using their preemptive right, they do not have to exercise it. Control and Preemption Free to share, print, make copies and changes. Get yours at www.boundless.com www.boundless.com/finance/textbooks/boundless-finance-textbook/stock-valuation-7/defining-stock-70/control-and-preemption-320- 143?campaign_content=book_192_chapter_7&campaign_term=Finance&utm_campaign=powerpoint&utm_medium=direct&utm_source=boundle ss Shareholder Meeting View on Boundless.com Stock Valuation > Defining Stock

Common Stock Preferred Stock Types of Stock Stock Valuation > Types of Stock Free to share, print, make copies and changes. Get yours at www.boundless.com www.boundless.com/finance?campaign_content=book_192_chapter_7&campaign_term=Finance&utm_campaign=powerpoint&utm_medium=dire ct&utm_source=boundless

Common stock is a form of equity ownership. It is a type of security that is also known as a voting share or an ordinary share. Common stock shareholders will not receive assets after bankruptcy unless the bondholders, other creditors, and preferred shareholders are paid first. Common shareholders also do not get dividends unless preferred shareholders receive them first. Common shareholders do receive voting rights. Some shareholders may also be able to exercise preemptive rights. Common Stock Free to share, print, make copies and changes. Get yours at www.boundless.com www.boundless.com/finance/textbooks/boundless-finance-textbook/stock-valuation-7/types-of-stock-71/common-stock-321- 1264?campaign_content=book_192_chapter_7&campaign_term=Finance&utm_campaign=powerpoint&utm_medium=direct&utm_source=boundl ess New York Stock Exchange View on Boundless.com Stock Valuation > Types of Stock

Preferred Stock is a security which has characteristics of both equity and debt securities. Preferred Stock shareholders have rights to dividends and assets (in the case of bankruptcy) before Common Stock shareholders. Preferred stockholders have a number of rights which will vary based on the business entity, but generally do not carry voting rights. Preferred Stock Free to share, print, make copies and changes. Get yours at www.boundless.com www.boundless.com/finance/textbooks/boundless-finance-textbook/stock-valuation-7/types-of-stock-71/preferred-stock-322- 6601?campaign_content=book_192_chapter_7&campaign_term=Finance&utm_campaign=powerpoint&utm_medium=direct&utm_source=boundl ess Bond View on Boundless.com Stock Valuation > Types of Stock

Claim to Income Voting Right Purchasing New Shares Preferred Stock Rules and Rights Provisions of Preferred Stock Comparing Common Stock, Preferred Stock, and Debt Rules and Rights of Common and Preferred Stock Stock Valuation > Rules and Rights of Common and Preferred Stock Free to share, print, make copies and changes. Get yours at www.boundless.com www.boundless.com/finance?campaign_content=book_192_chapter_7&campaign_term=Finance&utm_campaign=powerpoint&utm_medium=dire ct&utm_source=boundless

Common stock and preferred stock are both forms of equity ownership but carry different rights and claims to income. Preferred stock shareholders will have claim to assets over common stock shareholders in the case of company liquidation. Preferred stock also has first right to dividends. Claim to Income Free to share, print, make copies and changes. Get yours at www.boundless.com www.boundless.com/finance/textbooks/boundless-finance-textbook/stock-valuation-7/rules-and-rights-of-common-and-preferred-stock-72/claim-to- income-323- 3879?campaign_content=book_192_chapter_7&campaign_term=Finance&utm_campaign=powerpoint&utm_medium=direct&utm_source=boundl ess 1903 stock certificate of the Baltimore and Ohio Railroad View on Boundless.com Stock Valuation > Rules and Rights of Common and Preferred Stock

Common stock shareholders can generally vote on issues, such as members of the board of directors, stock splits, and the establishment of corporate objectives and policy. While having superior rights to dividends and assets over common stock, generally preferred stock does not carry voting rights. Many of the voting rights of a shareholder can be exercised at annual general body meetings of companies. An annual general meeting is a meeting that official bodies, and associations involving the general public, are often required by law to hold. Voting Right Free to share, print, make copies and changes. Get yours at www.boundless.com www.boundless.com/finance/textbooks/boundless-finance-textbook/stock-valuation-7/rules-and-rights-of-common-and-preferred-stock-72/voting- right-324- 7971?campaign_content=book_192_chapter_7&campaign_term=Finance&utm_campaign=powerpoint&utm_medium=direct&utm_source=boundl ess Shareholder Meeting View on Boundless.com Stock Valuation > Rules and Rights of Common and Preferred Stock

New share purchase is an important indicator of current shareholder belief in the health of the company and long term prospects for growth. Current Shareholders will often have preemptive rights that give them the right to purchase newly issued company shares before they go on sale to the general public. New shares can be purchased on exchanges, which offer a platform for the financial marketplace. Purchasing New Shares Free to share, print, make copies and changes. Get yours at www.boundless.com www.boundless.com/finance/textbooks/boundless-finance-textbook/stock-valuation-7/rules-and-rights-of-common-and-preferred-stock- 72/purchasing-new-shares-325- 1035?campaign_content=book_192_chapter_7&campaign_term=Finance&utm_campaign=powerpoint&utm_medium=direct&utm_source=boundl ess Exchanges View on Boundless.com Stock Valuation > Rules and Rights of Common and Preferred Stock

Preferred stock generally does not carry voting rights, but this may vary from company to company. Preferred stock can gain cumulative dividends, convertibility to common stock, and callability. The rights that come with ownership of preferred stock are detailed in a "Certificate of Designation". Preferred Stock Rules and Rights Free to share, print, make copies and changes. Get yours at www.boundless.com www.boundless.com/finance/textbooks/boundless-finance-textbook/stock-valuation-7/rules-and-rights-of-common-and-preferred-stock- 72/preferred-stock-rules-and-rights-326- 7558?campaign_content=book_192_chapter_7&campaign_term=Finance&utm_campaign=powerpoint&utm_medium=direct&utm_source=boundl ess VOC stock View on Boundless.com Stock Valuation > Rules and Rights of Common and Preferred Stock

If a preferred share has cumulative dividends, then it contains the provision that should a company fail to pay out dividends at any time at the stated rate, then the issuer will have to make up for it as time goes on. Convertible preferred stock can be exchanged for a predetermined number of company common stock shares. Often times companies will keep the right to call or buy back preferred shares at a predetermined price. Participating preferred issues offer holders the opportunity to receive extra dividends if the company achieves predetermined financial goals. Sometimes, dividends on preferred shares may be negotiated as floating; they may change according to a benchmark interest-rate index. Provisions of Preferred Stock Free to share, print, make copies and changes. Get yours at www.boundless.com www.boundless.com/finance/textbooks/boundless-finance-textbook/stock-valuation-7/rules-and-rights-of-common-and-preferred-stock- 72/provisions-of-preferred-stock-327- 5155?campaign_content=book_192_chapter_7&campaign_term=Finance&utm_campaign=powerpoint&utm_medium=direct&utm_source=boundl ess Historical dividend information for Franklin Automobile Company View on Boundless.com Stock Valuation > Rules and Rights of Common and Preferred Stock

Common stock and preferred stock fall behind debt holders as creditors that would receive assets in the case of company liquidation. Common stock and preferred stock are both types of equity ownership. They receive rights of ownership in the company, such as voting and dividends. Debt holders often receive a bond for lending and while this does not give the ownership rights of being a stockholder, it does create a superior claim to a company's assets in the case of liquidation. Comparing Common Stock, Preferred Stock, and Debt Free to share, print, make copies and changes. Get yours at www.boundless.com www.boundless.com/finance/textbooks/boundless-finance-textbook/stock-valuation-7/rules-and-rights-of-common-and-preferred-stock- 72/comparing-common-stock-preferred-stock-and-debt-328- 3880?campaign_content=book_192_chapter_7&campaign_term=Finance&utm_campaign=powerpoint&utm_medium=direct&utm_source=boundl ess A bond from the Dutch East India Company View on Boundless.com Stock Valuation > Rules and Rights of Common and Preferred Stock

Market Actors NYSE NASDAQ Market Reporting Stock Markets Stock Valuation > Stock Markets Free to share, print, make copies and changes. Get yours at www.boundless.com www.boundless.com/finance?campaign_content=book_192_chapter_7&campaign_term=Finance&utm_campaign=powerpoint&utm_medium=dire ct&utm_source=boundless

Pension funds are important shareholders of listed and private companies. Insurance companies are generally classified as either mutual or proprietary companies. A mutual fund is a type of professionally-managed collective investment vehicle that pools money from many investors to purchase securities. An index fund or index tracker is a collective investment scheme (usually a mutual fund or exchange-traded fund) that aims to replicate the movements of an index of a specific financial market, or a set of rules of ownership that are held constant, regardless of market conditions. An exchange-traded fund (ETF) is an investment fund traded on stock exchanges, much like stocks. A hedge fund is an fund that can undertake a wider range of investment and trading activities than other funds. It is generally only open to certain types of investors specified by regulators. Market Actors Free to share, print, make copies and changes. Get yours at www.boundless.com www.boundless.com/finance/textbooks/boundless-finance-textbook/stock-valuation-7/stock-markets-73/market-actors-329- 7640?campaign_content=book_192_chapter_7&campaign_term=Finance&utm_campaign=powerpoint&utm_medium=direct&utm_source=boundl ess Stock Market View on Boundless.com Stock Valuation > Stock Markets

The origin of the NYSE can be traced to May 17, 1792, when the Buttonwood Agreement was signed by 24 stockbrokers outside of 68 Wall Street in New York under a buttonwood tree on Wall Street. The New York Stock Exchange (sometimes referred to as "the Big Board") provides a means for buyers and sellers to trade shares of stock in companies registered for public trading. The New York Stock Exchange is open for trading Monday through Friday from 9:30 am to 4:00 pm ET, with the exception of holidays declared by the NYSE in advance. Traders can gather around the appropriate post. There, a specialist broker acts as an auctioneer in an open outcry auction market environment to bring buyers and sellers together and to manage the actual auction. To be listed on the New York Stock Exchange, a company must have issued at least a million shares of stock worth $100 million and must have earned more than $10 million over the last three years. NYSE Free to share, print, make copies and changes. Get yours at www.boundless.com www.boundless.com/finance/textbooks/boundless-finance-textbook/stock-valuation-7/stock-markets-73/nyse-330- 10887?campaign_content=book_192_chapter_7&campaign_term=Finance&utm_campaign=powerpoint&utm_medium=direct&utm_source=bound less NYSE Trading Floor View on Boundless.com Stock Valuation > Stock Markets

NASDAQ was founded in 1971 by the National Association of Securities Dealers (NASD), who divested themselves of it in a series of sales in 2000 and 2001. NASDAQ quotes are available at three levels: Level 1 shows the highest bid and lowest offer; Level 2 shows all public quotes of market makers; Level 3 is used by the market makers and allows them to enter their quotes and execute orders. NASDAQ has a pre-market session from 7:00am to 9:30am, a normal trading session from 9:30am to 4:00pm, and a post-market session from 4:00pm to 8:00pm (all times in ET). Three market tiers are NASDAQ Capital Market – Small Cap, NASDAQ Global Market – Mid Cap, NASDAQ Global Select Market – Large Cap. NASDAQ Free to share, print, make copies and changes. Get yours at www.boundless.com www.boundless.com/finance/textbooks/boundless-finance-textbook/stock-valuation-7/stock-markets-73/nasdaq-331- 7282?campaign_content=book_192_chapter_7&campaign_term=Finance&utm_campaign=powerpoint&utm_medium=direct&utm_source=boundl ess NASDAQ View on Boundless.com Stock Valuation > Stock Markets

The is a tool used by investors and financial managers to describe the market and to compare the return on specific investments. An index is a mathematical construct, so it may not be invested in directly. A 'world' or 'global' stock market index includes (typically large) companies without regard for where they are domiciled or traded. A 'national' index represents the performance of the stock market of a given nation—and by proxy, reflects investor sentiment on the state of its economy. Stock market indices provide invaluable information for investors and accountants. Market Reporting Free to share, print, make copies and changes. Get yours at www.boundless.com www.boundless.com/finance/textbooks/boundless-finance-textbook/stock-valuation-7/stock-markets-73/market-reporting-332- 5493?campaign_content=book_192_chapter_7&campaign_term=Finance&utm_campaign=powerpoint&utm_medium=direct&utm_source=boundl ess Dow Jones Crashes View on Boundless.com Stock Valuation > Stock Markets

Expected Dividends, No Growth Expected Dividends and Constant Growth Relationship Between Dividend Payments and the Growth Rate Understanding Future Stock Value Valuing Nonconstant Growth Dividends Stock Valuation Stock Valuation > Stock Valuation Free to share, print, make copies and changes. Get yours at www.boundless.com www.boundless.com/finance?campaign_content=book_192_chapter_7&campaign_term=Finance&utm_campaign=powerpoint&utm_medium=dire ct&utm_source=boundless

Companies generally either retain earnings for investment, or distribute them as dividend, according to their growth strategy. Clientele effects suggests that different dividend levels attract different types of investors. Value investors look for indications that a stock is undervalued. High dividends are one indication of undervaluation. Knowing a firm's cost of capital is needed in order to make better decisions. Managers make capital budgeting decisions while capital providers make decisions about lending and investment. Expected Dividends, No Growth Free to share, print, make copies and changes. Get yours at www.boundless.com www.boundless.com/finance/textbooks/boundless-finance-textbook/stock-valuation-7/stock-valuation-74/expected-dividends-no-growth-333- 4280?campaign_content=book_192_chapter_7&campaign_term=Finance&utm_campaign=powerpoint&utm_medium=direct&utm_source=boundl ess Investing trade-offs View on Boundless.com Stock Valuation > Stock Valuation

Companies are constantly changing, as well as the economy. Solely using historical growth rates to predict the future is not an acceptable form of valuation. Calculating the future growth rate requires personal investment research. A generalized version of the Walter model (1956), SPM considers the effects of dividends, earnings growth, as well as the risk profile of a firm on a stock's value. The Gordon model or Gordon's growth model is the best known of a class of discounted dividend models. It assumes that dividends will increase at a constant growth rate (less than the discount rate) forever. Expected Dividends and Constant Growth Free to share, print, make copies and changes. Get yours at www.boundless.com www.boundless.com/finance/textbooks/boundless-finance-textbook/stock-valuation-7/stock-valuation-74/expected-dividends-and-constant-growth- 334- 7963?campaign_content=book_192_chapter_7&campaign_term=Finance&utm_campaign=powerpoint&utm_medium=direct&utm_source=boundl ess Your Dividend View on Boundless.com Stock Valuation > Stock Valuation

Investors take into account how much capital is distributed to investors, and conversely how much capital is kept from investors. Investors hope that firms will use retained earnings to either maximize their current operations or invest in such as a way as to lead to higher profits. Some firms are unable to distribute earnings, since their funds are tied up in maintenance, repairs, et cetera. On the other hand, some companies can retain earnings and put that money back to work - i.e., invest in growth opportunities. Relationship Between Dividend Payments and the Growth Rate Free to share, print, make copies and changes. Get yours at www.boundless.com www.boundless.com/finance/textbooks/boundless-finance-textbook/stock-valuation-7/stock-valuation-74/relationship-between-dividend-payments- and-the-growth-rate-335- 6420?campaign_content=book_192_chapter_7&campaign_term=Finance&utm_campaign=powerpoint&utm_medium=direct&utm_source=boundl ess Dividend View on Boundless.com Stock Valuation > Stock Valuation

Earnings Per Share is the total net income of the company divided by the number of shares outstanding; the Profits/Earnings ratio is the stock price divided by the annual EPS figure. Return on Invested Capital measures how much money the company makes each year per dollar of invested capital and approximates the expected level of growth; Return on Assets measures the company's ability to make money from its assets. To measure Market Capitalization (the value of all of a company's stock), multiply the current stock price by the fully diluted shares outstanding; Enterprise Value is equal to the total value the company is trading for on the stock market. Enterprise Value (EV) to earnings before interest, taxes, depreciation and amortization (EBITDA) is one of the best measurements of whether or not a company should be valued as cheap or expensive. Understanding Future Stock Value Free to share, print, make copies and changes. Get yours at www.boundless.com www.boundless.com/finance/textbooks/boundless-finance-textbook/stock-valuation-7/stock-valuation-74/understanding-future-stock-value-336- 6143?campaign_content=book_192_chapter_7&campaign_term=Finance&utm_campaign=powerpoint&utm_medium=direct&utm_source=boundl ess Stock Valuation View on Boundless.com Stock Valuation > Stock Valuation

Limited high-growth approximation: When a stock has a significantly higher growth rate than its peers, it is sometimes assumed that the earnings growth rate will be sustained for a short time (say, 5 years), and then the growth rate will revert to the mean. Implied Growth Models: One can use the Gordon model or the limited high-growth period approximation model to impute an implied growth estimate. Imputed growth acceleration ratio: Subsequently, one can divide this imputed growth estimate by recent historical growth rates. Valuing Nonconstant Growth Dividends Free to share, print, make copies and changes. Get yours at www.boundless.com www.boundless.com/finance/textbooks/boundless-finance-textbook/stock-valuation-7/stock-valuation-74/valuing-nonconstant-growth-dividends- 337- 4982?campaign_content=book_192_chapter_7&campaign_term=Finance&utm_campaign=powerpoint&utm_medium=direct&utm_source=boundl ess Dividend View on Boundless.com Stock Valuation > Stock Valuation

Valuing the Corporation Discounted Dividend vs. Corporate Valuation Valuing the Corporation Stock Valuation > Valuing the Corporation Free to share, print, make copies and changes. Get yours at www.boundless.com www.boundless.com/finance?campaign_content=book_192_chapter_7&campaign_term=Finance&utm_campaign=powerpoint&utm_medium=dire ct&utm_source=boundless

Income approaches include Discount or capitalization rates, Capital Asset Pricing Model (CAPM), Modified Capital Asset Pricing Model, and Weighted average cost of capital ("WACC"). The asset approach to business valuation is based on the principle of substitution: no rational investor will pay more for the business assets than the cost of procuring assets of similar economic utility. The market approach to business valuation is rooted in the economic principle of competition: in a free market the supply and demand forces will drive the price of business assets to a certain equilibrium. Valuing the Corporation Free to share, print, make copies and changes. Get yours at www.boundless.com www.boundless.com/finance/textbooks/boundless-finance-textbook/stock-valuation-7/valuing-the-corporation-75/valuing-the-corporation-338- 3792?campaign_content=book_192_chapter_7&campaign_term=Finance&utm_campaign=powerpoint&utm_medium=direct&utm_source=boundl ess Valuation View on Boundless.com Stock Valuation > Valuing the Corporation

P = D1 / ( r - g ). P is the current stock price, g is the constant growth rate in perpetuity expected for the dividends, r is the constant cost of equity for that company, and D1 is the value of the next year's dividends. The equation can also be understood to generate the value of a stock such that the sum of its dividend yield (income) plus its growth (capital gains) equals the investor's required total return. There are also problems with the model, such as the presumption of a steady and perpetual growth rate less than the cost of capital may not be reasonable. Discounted Dividend vs. Corporate Valuation Free to share, print, make copies and changes. Get yours at www.boundless.com www.boundless.com/finance/textbooks/boundless-finance-textbook/stock-valuation-7/valuing-the-corporation-75/discounted-dividend-vs- corporate-valuation-339- 5150?campaign_content=book_192_chapter_7&campaign_term=Finance&utm_campaign=powerpoint&utm_medium=direct&utm_source=boundl ess Stock dividend View on Boundless.com Stock Valuation > Valuing the Corporation

Free to share, print, make copies and changes. Get yours at www.boundless.com Appendix

Key terms bond A bond is an instrument of indebtness of the bond issuers toward the bond holders. break-even Break-even (or break even) is the point of balance between making either a profit or a loss. Callable shares Shares which can be bought back by the issuer at a predetermined price. capital gains Profit that results from a disposition of a capital asset, such as stock, bond, or real estate due to arbitrage. clientele The body or class of people who frequent an establishment or purchase a service, especially when considered as forming a more-or-less homogeneous group of clients in terms of values or habits. closed-end Closed-end funds (or closed-ended funds) are mutual funds with a fixed number of shares (or units). Unlike open- end funds, new shares/units are not created by managers, to meet demand from investors, but the shares can only be purchased (and sold) in the market. Common stock Common stock is a form of equity and type of security. Common stock shareholders are at the bottom of the line when it comes to dividends and receiving compensation in the case of bankruptcy. Common stock Common stock is a form of corporate equity ownership, a type of security. Common stock Shares of an ownership interest in the equity of a corporation or other entity with limited liability. Holders of this type of stock are entitled to dividends. Importantly, the financial rights for holders of this type of stock are junior to preferred stock and liabilities. Common stock Common stock is a form of equity and type of security. Common stock shareholders are at the bottom of the line when it comes to dividends and receiving compensation in the case of bankruptcy. Free to share, print, make copies and changes. Get yours at www.boundless.com Stock Valuation

Convertible preferred stock Convertible preferred stock can be exchanged for a predetermined number of company common stock shares. corporation a group of individuals, created by law or under authority of law, having a continuous existence independent of the existences of its members, and powers and liabilities distinct from those of its members Cumulative Dividends Condition where owners of certain shares will receive accumulated dividends in the case a company cannot pay out dividends at the stated rate at the stated time. DCF models Valuation using discounted cash flows is a method for determining the current value of a company using future cash flows adjusted for time value. The future cash flow set is made up of the cash flows within the determined forecast period and a continuing value that represents the cash flow stream after the forecast period. discounted cash flow In finance, discounted cash flow (DCF) analysis is a method of valuing a project, company, or asset using the concepts of the time value of money. All future cash flows are estimated and discounted to give their present values (PVs)– the sum of all future cash flows, both incoming and outgoing, is the net present value (NPV), which is taken as the value or price of the cash flows in question. dividend Dividends are payments made by a corporation to its shareholder members. Dutch auction an event to buy or sell that starts at a high price that is gradually reduced by the auctioneer until someone is willing to buy equity The residual claim or interest to investors in assets after all liabilities are paid. If liability exceeds assets, negative equity exists and can be purchased through stock. FINRA In the United States, the Financial Industry Regulatory Authority, Inc., or FINRA, is a private corporation that acts as a self-regulatory organization (SRO). FINRA is the successor to the National Association of Securities Dealers, Inc. (NASD). Though sometimes mistaken for a government agency, it is a non-governmental organization that performs financial regulation of member brokerage firms and exchange markets. The government organization which acts as the ultimate regulator of the securities industry, including FINRA, is the Securities and Exchange Commission. GAAP Generally Accepted Accounting Principles refer to the standard framework of guidelines, conventions, and rules accountants are expected to follow in recording, summarizing, and preparing financial statements in any given jurisdiction. Gordon Growth Model Gordon Growth Model is also called the dividend discount model (DDM), which is a way of valuing a company based on the theory that a stock is worth the discounted sum of all of its future dividend payments. liquidation liquidation is the process by which a company (or part of a company) is brought to an end, and the assets and property of the company redistributed Free to share, print, make copies and changes. Get yours at www.boundless.com Stock Valuation

market capitalization The total market value of the equity in a publicly traded entity. Miller-Modigliani hypothesis The Modigliani–Miller theorem (of Franco Modigliani, Merton Miller) forms the basis for modern thinking on capital structure. The basic theorem states that, under a certain market price process (the classical random walk), in the absence of taxes, bankruptcy costs, agency costs, and asymmetric information, and in an efficient market, the value of a firm is unaffected by how that firm is financed. NASDAQ The National Association of Securities Dealers Automated Quotations; this is an electronic stock market. net asset value Net asset value (NAV) is the value of an entity's assets less the value of its liabilities, often in relation to open- end or mutual funds, since shares of such funds registered with the U.S. open-end An open-end(ed) fund is a collective investment scheme which can issue and redeem shares at any time. Preemption The right of a shareholder to purchase newly issued shares of a business entity before they are available to the general public so as to protect individual ownership from dilution. preemptive right a contractual ability to acquire certain property newly coming into existence before it can be offered to any other person or entity Preferred Stock Preferred stock is an equity security that has the properties of both an equity and debt instrument and is higher ranking than common stock. Free to share, print, make copies and changes. Get yours at www.boundless.com Stock Valuation

Preferred Stock Preferred stock is an equity security that has the properties of both an equity and debt instrument and is higher ranking than common stock. risk premium A risk premium is the minimum amount of money by which the expected return on a risky asset must exceed the known return on a risk-free asset, or the expected return on a less risky asset, in order to induce an individual to hold the risky asset rather than the risk-free asset. secondary market The financial market in which previously issued financial instruments such as stock, bonds, options, and futures are bought and sold. shareholder A shareholder legally owns at least one share of stock in a company, and has rights with regards to the company because of this Stock The stock of a company represents the original capital paid into the business by its founders. It serves as a security for investors. Stock Exchange A form of exchange that provides services for stock brokers and traders to trade stocks, bonds and other securities. Voting rights Rights which are generally associated with common stock shareholders in regards to business entity matters ( such as electing the board of directors or establishing corporate policy) weighted average An arithmetic mean of values biased according to agreed weightings. Free to share, print, make copies and changes. Get yours at www.boundless.com Stock Valuation

Stock valuation involves many methods. Free to share, print, make copies and changes. Get yours at www.boundless.com Geek Shares. "What Is Stock?Shares of Stock." CC BY http://www.greekshares.com/shares.php View on Boundless.comCC BYhttp://www.greekshares.com/shares.phpView on Boundless.com Stock Valuation

Valuation Business Valuation include different methods. Free to share, print, make copies and changes. Get yours at www.boundless.com Google. "Google Image Result for." CC BY http://www.google.com/imgres?q=valuation&hl=en&biw=1275&bih=596&tbs=sur:fmc&tbm=isch&imgrefurl=http://www.restaurantexpert.com/business_valuations.ht ml&tbnid=DY6VL9TEGPxVmM&docid=a9qTF1sUC2ipsM&ved=0CE4QhRYoAA&ei=9oGNUM_-AuTu0gGuwIFg&dur=5610 View on Boundless.comCC BY http://www.google.com/imgres?q=valuation&hl=en&biw=1275&bih=596&tbs=sur:fmc&tbm=isch&imgrefurl=http://www.restaurantexpert.com/business_valuations.ht ml&tbnid=DY6VL9TEGPxVmM&docid=a9qTF1sUC2ipsM&ved=0CE4QhRYoAA&ei=9oGNUM_-AuTu0gGuwIFg&dur=5610View on Boundless.com Stock Valuation

Your Dividend DDM can be used to calculate a constant growth company. Free to share, print, make copies and changes. Get yours at www.boundless.com Stocks on Wall Street. "My 10 Favorite Dividend Stocks : Stocks on Wall Street." CC BY http://stocksonwallstreet.net/2010/10/my-10-favorite-dividend-stocks/ View on Boundless.comCC BYhttp://stocksonwallstreet.net/2010/10/my-10-favorite-dividend-stocks/View on Boundless.com Stock Valuation

Shareholder Meeting This scene from "The Office" humorously illustrates a shareholder meeting, where the shareholder can exercise their right to vote on company issues or question company directors. Free to share, print, make copies and changes. Get yours at www.boundless.com Wikipedia. "Shareholder Meeting." GNU FDL http://en.wikipedia.org/wiki/Shareholder_Meeting View on Boundless.comGNU FDLhttp://en.wikipedia.org/wiki/Shareholder_MeetingView on Boundless.com Stock Valuation

CAPM CAPM formula Free to share, print, make copies and changes. Get yours at www.boundless.com Google. "Google Image Result for." CC BY http://www.google.com/imgres?q=capm&num=10&hl=en&biw=1275&bih=596&tbs=sur:fmc&tbm=isch&imgrefurl=http://www.investopedia.com/articles/06/capm.asp &tbnid=15LfZEIuq-PgOM&docid=ro6DJyWo1ffc9M&ved=0CE4QhRYoAA&ei=ooGNUJODMtS20AGG94HQDQ&dur=5291 View on Boundless.comCC BY http://www.google.com/imgres?q=capm&num=10&hl=en&biw=1275&bih=596&tbs=sur:fmc&tbm=isch&imgrefurl=http://www.investopedia.com/articles/06/capm.asp &tbnid=15LfZEIuq-PgOM&docid=ro6DJyWo1ffc9M&ved=0CE4QhRYoAA&ei=ooGNUJODMtS20AGG94HQDQ&dur=5291View on Boundless.com Stock Valuation

A bond from the Dutch East India Company A bond is a financial security that represents a promise by a company or government to repay a certain amount, with interest, to the bondholder. Free to share, print, make copies and changes. Get yours at www.boundless.com Wikipedia. "Vereinigte Ostindische Compagnie bond." CC BY-SA http://en.wikipedia.org/wiki/File:Vereinigte_Ostindische_Compagnie_bond.jpg View on Boundless.comCC BY-SAhttp://en.wikipedia.org/wiki/File:Vereinigte_Ostindische_Compagnie_bond.jpgView on Boundless.com Stock Valuation

Investing trade-offs Value investors trade growth for dividends. Free to share, print, make copies and changes. Get yours at www.boundless.com Tumblr. "Explore | Tumblr." CC BY http://www.tumblr.com/tagged/home-equity-loans?before=1327946406 View on Boundless.comCC BYhttp://www.tumblr.com/tagged/home-equity-loans?before=1327946406View on Boundless.com Stock Valuation

Dividend The portion of the net income not paid to investors is left for the growth of a company. Free to share, print, make copies and changes. Get yours at www.boundless.com Google. "Google Image Result for." CC BY http://www.google.com/imgres?q=dividend&num=10&hl=en&biw=1275&bih=596&tbs=sur:fmc&tbm=isch&imgrefurl=http://www.bized.co.uk/learn/economics/market s/stockexchange/index.htm%253Fpage%253D3&tbnid=- EMCOv6nRn5DoM&docid=zfaAwyw0jJHskM&ved=0CFwQhRYoAQ&ei=lqCNUPPpO4en0AHn2IDQBA&dur=6867 View on Boundless.comCC BY http://www.google.com/imgres?q=dividend&num=10&hl=en&biw=1275&bih=596&tbs=sur:fmc&tbm=isch&imgrefurl=http://www.bized.co.uk/learn/economics/market s/stockexchange/index.htm%253Fpage%253D3&tbnid=- EMCOv6nRn5DoM&docid=zfaAwyw0jJHskM&ved=0CFwQhRYoAQ&ei=lqCNUPPpO4en0AHn2IDQBA&dur=6867View on Boundless.com Stock Valuation

Exchanges New shares can be traded on exchanges such as the Nasdaq, but will usually be offered to current shareholders before being put on sale to the general public. Free to share, print, make copies and changes. Get yours at www.boundless.com Wikipedia. "Nasdaq." GNU FDL http://en.wikipedia.org/wiki/Nasdaq View on Boundless.comGNU FDLhttp://en.wikipedia.org/wiki/NasdaqView on Boundless.com Stock Valuation

1903 stock certificate of the Baltimore and Ohio Railroad Ownership of shares is documented by the issuance of a stock certificate and represents the shareholder's rights with regards to the business entity. Free to share, print, make copies and changes. Get yours at www.boundless.com Wikipedia. "B&O RR common stock." Public domain http://en.wikipedia.org/wiki/File:B%2526O_RR_common_stock.jpg View on Boundless.comPublic domainhttp://en.wikipedia.org/wiki/File:B%2526O_RR_common_stock.jpgView on Boundless.com Stock Valuation

Shareholder Meeting This scene from "The Office" humorously illustrates a shareholder meeting, where the shareholder can exercise their right to vote on company issues or question company directors. Free to share, print, make copies and changes. Get yours at www.boundless.com Wikipedia. "Shareholder Meeting." GNU FDL http://en.wikipedia.org/wiki/Shareholder_Meeting View on Boundless.comGNU FDLhttp://en.wikipedia.org/wiki/Shareholder_MeetingView on Boundless.com Stock Valuation

NASDAQ NASDAQ is the second-largest stock exchange market in the world, as of 2012. Free to share, print, make copies and changes. Get yours at www.boundless.com Flickr. "All sizes | NASDAQ | Flickr - Photo Sharing!." CC BY http://www.flickr.com/photos/deleep/95340356/sizes/m/in/photostream/ View on Boundless.comCC BYhttp://www.flickr.com/photos/deleep/95340356/sizes/m/in/photostream/View on Boundless.com Stock Valuation

1903 stock certificate of the Baltimore and Ohio Railroad Preferred and common stock both carry rights of ownership, but represent different classes of equity ownership. Free to share, print, make copies and changes. Get yours at www.boundless.com Wikipedia. "B&O RR common stock." Public domain http://en.wikipedia.org/wiki/File:B%2526O_RR_common_stock.jpg View on Boundless.comPublic domainhttp://en.wikipedia.org/wiki/File:B%2526O_RR_common_stock.jpgView on Boundless.com Stock Valuation

VOC stock Preferred stock is a security ( a little more modern that this stock from the VOC or Dutch East India Company) that carries certain rights which designate it from common stock or debt. Free to share, print, make copies and changes. Get yours at www.boundless.com Wikipedia. "Stock." GNU FDL http://en.wikipedia.org/wiki/Stock View on Boundless.comGNU FDLhttp://en.wikipedia.org/wiki/StockView on Boundless.com Stock Valuation

New York Stock Exchange Stocks can be bought and sold on exchanges, like the New York Stock Exchange shown above. Free to share, print, make copies and changes. Get yours at www.boundless.com Wikipedia. "Stock exchange." GNU FDL http://en.wikipedia.org/wiki/Stock_exchange View on Boundless.comGNU FDLhttp://en.wikipedia.org/wiki/Stock_exchangeView on Boundless.com Stock Valuation

Dow Jones Crashes DJIA drops signifying recession. Free to share, print, make copies and changes. Get yours at www.boundless.com Google. "Google Image Result for." CC BY http://www.google.com/imgres?q=dow+jones&hl=en&biw=1275&bih=596&tbs=sur:fmc&tbm=isch&imgrefurl=http://seattlebubble.com/blog/2009/02/11/crash- comparisons-job-losses-dow-jones/&tbnid=QA8jlSqD03ybZM&docid=TlMwVAqQRdIwRM&ved=0CHgQhRYoAA&ei=Z2WNUNWPIen00gGBloCwBQ&dur=3024 View on Boundless.comCC BY http://www.google.com/imgres?q=dow+jones&hl=en&biw=1275&bih=596&tbs=sur:fmc&tbm=isch&imgrefurl=http://seattlebubble.com/blog/2009/02/11/crash- comparisons-job-losses-dow-jones/&tbnid=QA8jlSqD03ybZM&docid=TlMwVAqQRdIwRM&ved=0CHgQhRYoAA&ei=Z2WNUNWPIen00gGBloCwBQ&dur=3024 View on Boundless.com Stock Valuation

Bond Preferred Stocks are considered a hybrid security with properties of both stocks and bonds, but are subordinate to bonds when it comes to rights of claim to company assets. Free to share, print, make copies and changes. Get yours at www.boundless.com ETF Trends. "ETF Spotlight: High-Yield Corporate Bonds | ETF Trends." CC BY http://www.etftrends.com/2012/05/etf-spotlight-high-yield-corporate-bonds-2/ View on Boundless.comCC BYhttp://www.etftrends.com/2012/05/etf-spotlight-high-yield-corporate-bonds-2/View on Boundless.com Stock Valuation

Stock dividend Discounted dividend method can be used to value a company. Free to share, print, make copies and changes. Get yours at www.boundless.com Google. "Google Image Result for." CC BY http://www.google.com/imgres?q=dividend&hl=en&biw=1275&bih=596&tbs=sur:fmc&tbm=isch&imgrefurl=http://beginnersinvest.about.com/od/dividendsdrips1/ss/di vidends-and-dividend-investing-101_4.htm&tbnid=F0EZJ5_oZMH0TM&docid=lVArksgtaJEffM&ved=0CGgQhRYoAA&ei=yoaNUMH0NuPC0QHVlIG4DQ&dur=5213 View on Boundless.comCC BY http://www.google.com/imgres?q=dividend&hl=en&biw=1275&bih=596&tbs=sur:fmc&tbm=isch&imgrefurl=http://beginnersinvest.about.com/od/dividendsdrips1/ss/di vidends-and-dividend-investing-101_4.htm&tbnid=F0EZJ5_oZMH0TM&docid=lVArksgtaJEffM&ved=0CGgQhRYoAA&ei=yoaNUMH0NuPC0QHVlIG4DQ&dur=5213 View on Boundless.com Stock Valuation

Historical dividend information for Franklin Automobile Company Dividends are one of the privileges of stock ownership, and preferred shares get more rights to them than common shares do. Free to share, print, make copies and changes. Get yours at www.boundless.com Wikimedia. "Wikimedia." CC BY-SA http://wikimedia.org View on Boundless.comCC BY-SAhttp://wikimedia.orgView on Boundless.com Stock Valuation

Dividend DCF model can be used to calculate nonconstant growth dividends. Free to share, print, make copies and changes. Get yours at www.boundless.com Blogspot. "DESIRE TO LEARN...: Walter's model VS Market price of the share." CC BY http://cmaanuj.blogspot.com/2012/02/significance-of-walters-model-in.html View on Boundless.comCC BYhttp://cmaanuj.blogspot.com/2012/02/significance-of-walters-model-in.html View on Boundless.com Stock Valuation

Stock Market Different kinds of investors are active in stock market. Free to share, print, make copies and changes. Get yours at www.boundless.com Flickr. "All sizes | stock market | Flickr - Photo Sharing!." CC BY http://www.flickr.com/photos/68751915@N05/6870880911/sizes/m/in/photostream/ View on Boundless.comCC BYhttp://www.flickr.com/photos/68751915@N05/6870880911/sizes/m/in/photostream/View on Boundless.com Stock Valuation

NYSE Trading Floor Buyers and sellers meet and engage in face-to-face transactions at the NYSE, which is an auction-style secondary market. Free to share, print, make copies and changes. Get yours at www.boundless.com Flickr. "All sizes | NYSE Floor View | Flickr - Photo Sharing!." CC BY http://www.flickr.com/photos/76046205@N00/119753144/sizes/m/in/photostream/ View on Boundless.comCC BYhttp://www.flickr.com/photos/76046205@N00/119753144/sizes/m/in/photostream/View on Boundless.com Stock Valuation

Free to share, print, make copies and changes. Get yours at www.boundless.com Stock Valuation Which of the following statements regarding what stock in a company represents is true? A) Stock represents the original capital invested in the business by its founders. B) Ownership of stock represents a stake of ownership in the business entity. C) All of these statements. D) Stock is valued according to market demand and overall business health.

Free to share, print, make copies and changes. Get yours at www.boundless.comwww.boundless.com Boundless - LO. "Boundless." CC BY-SA 3.0 http://www.boundless.com/CC BY-SA 3.0http://www.boundless.com/ Stock Valuation Which of the following statements regarding what stock in a company represents is true? A) Stock represents the original capital invested in the business by its founders. B) Ownership of stock represents a stake of ownership in the business entity. C) All of these statements. D) Stock is valued according to market demand and overall business health.

Free to share, print, make copies and changes. Get yours at www.boundless.com Stock Valuation Which of the following statement accurately describes a shareholder's preemption rights? A) The right to vote on directors. B) The right to acquire certain property coming into existence, such as stock, before anyone else. C) The right to purchase new shares issued by the company. D) The right to claim a company's remaining assets after a liquidation.

Free to share, print, make copies and changes. Get yours at www.boundless.comwww.boundless.com Boundless - LO. "Boundless." CC BY-SA 3.0 http://www.boundless.com/CC BY-SA 3.0http://www.boundless.com/ Stock Valuation Which of the following statement accurately describes a shareholder's preemption rights? A) The right to vote on directors. B) The right to acquire certain property coming into existence, such as stock, before anyone else. C) The right to purchase new shares issued by the company. D) The right to claim a company's remaining assets after a liquidation.

Free to share, print, make copies and changes. Get yours at www.boundless.com Stock Valuation Which of the following benefits is NOT associated with common stock? A) The right to vote on corporate objectives and policy. B) Preemptive rights. C) Guaranteed dividends. D) The right to vote on who gets to sit on the company's Board of Directors.

Free to share, print, make copies and changes. Get yours at www.boundless.comwww.boundless.com Boundless - LO. "Boundless." CC BY-SA 3.0 http://www.boundless.com/CC BY-SA 3.0http://www.boundless.com/ Stock Valuation Which of the following benefits is NOT associated with common stock? A) The right to vote on corporate objectives and policy. B) Preemptive rights. C) Guaranteed dividends. D) The right to vote on who gets to sit on the company's Board of Directors.

Free to share, print, make copies and changes. Get yours at www.boundless.com Stock Valuation Which of the following features is generally NOT associated with preferred stock? A) Voting rights. B) Preference in dividends. C) Convertability to common stock. D) Callability at the option of the corporation.

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Free to share, print, make copies and changes. Get yours at www.boundless.com Stock Valuation Which of the following statements about a preferred stockholder's rights to the company's income is NOT true? A) When a business is liquidated, preferred shareholders receive funds equal to the stock's par value. B) A preferred stock's par value represents the original investment when the shares were issued. C) Dividends to common and preferred shareholders are paid at the same time. D) The price of both common and preferred shares are subject to market determinants.

Free to share, print, make copies and changes. Get yours at www.boundless.comwww.boundless.com Boundless - LO. "Boundless." CC BY-SA 3.0 http://www.boundless.com/CC BY-SA 3.0http://www.boundless.com/ Stock Valuation Which of the following statements about a preferred stockholder's rights to the company's income is NOT true? A) When a business is liquidated, preferred shareholders receive funds equal to the stock's par value. B) A preferred stock's par value represents the original investment when the shares were issued. C) Dividends to common and preferred shareholders are paid at the same time. D) The price of both common and preferred shares are subject to market determinants.

Free to share, print, make copies and changes. Get yours at www.boundless.com Stock Valuation Which of the following statements regarding voting rights is NOT true? A) Generally each share of common stock equals one vote. B) Preferred stock generally does not carry voting rights. C) Shareholders generally get to vote on who is part of the corporate Board of Directors. D) Corporate shareholders are prohibited from casting their vote online.

Free to share, print, make copies and changes. Get yours at www.boundless.comwww.boundless.com Boundless - LO. "Boundless." CC BY-SA 3.0 http://www.boundless.com/CC BY-SA 3.0http://www.boundless.com/ Stock Valuation Which of the following statements regarding voting rights is NOT true? A) Generally each share of common stock equals one vote. B) Preferred stock generally does not carry voting rights. C) Shareholders generally get to vote on who is part of the corporate Board of Directors. D) Corporate shareholders are prohibited from casting their vote online.

Free to share, print, make copies and changes. Get yours at www.boundless.com Stock Valuation Which of the following is a reason a shareholder may buy more shares in a company? A) All of these answers. B) To prevent the shareholder's percentage of ownership in the company from being diluted. C) The shareholder believes the company is a good investment. D) The shareholder wishes to maintain his ownership position in the company.

Free to share, print, make copies and changes. Get yours at www.boundless.comwww.boundless.com Boundless - LO. "Boundless." CC BY-SA 3.0 http://www.boundless.com/CC BY-SA 3.0http://www.boundless.com/ Stock Valuation Which of the following is a reason a shareholder may buy more shares in a company? A) All of these answers. B) To prevent the shareholder's percentage of ownership in the company from being diluted. C) The shareholder believes the company is a good investment. D) The shareholder wishes to maintain his ownership position in the company.

Free to share, print, make copies and changes. Get yours at www.boundless.com Stock Valuation Which of the following is generally NOT a right granted to owners of preferred shares? A) Callability. B) Convertibility to common shares. C) Variable dividend amounts. D) Preference with regards to receiving dividends.

Free to share, print, make copies and changes. Get yours at www.boundless.comwww.boundless.com Boundless - LO. "Boundless." CC BY-SA 3.0 http://www.boundless.com/CC BY-SA 3.0http://www.boundless.com/ Stock Valuation Which of the following is generally NOT a right granted to owners of preferred shares? A) Callability. B) Convertibility to common shares. C) Variable dividend amounts. D) Preference with regards to receiving dividends.

Free to share, print, make copies and changes. Get yours at www.boundless.com Stock Valuation A company sells preferred stock with the provision that the company can repurchase the shares from the shareholder at a predetermined price. Which of the following describes this stock? A) Callable preferred stock. B) Participating preferred stock. C) Convertible preferred stock. D) All of these answers.

Free to share, print, make copies and changes. Get yours at www.boundless.comwww.boundless.com Boundless - LO. "Boundless." CC BY-SA 3.0 http://www.boundless.com/CC BY-SA 3.0http://www.boundless.com/ Stock Valuation A company sells preferred stock with the provision that the company can repurchase the shares from the shareholder at a predetermined price. Which of the following describes this stock? A) Callable preferred stock. B) Participating preferred stock. C) Convertible preferred stock. D) All of these answers.

Free to share, print, make copies and changes. Get yours at www.boundless.com Stock Valuation A company goes bankrupt and its assets are to be divided between its shareholders and debtholders. Which of the following, from highest priority to lowest, is the correct order of how the company's assets should be divided? A) Bondholders, preferred shareholders, common shareholders. B) Bondholders, common shareholders, preferred shareholders. C) Preferred shareholders, bondholders, common shareholders. D) Preferred shareholders, common shareholders, bondholders.

Free to share, print, make copies and changes. Get yours at www.boundless.comwww.boundless.com Boundless - LO. "Boundless." CC BY-SA 3.0 http://www.boundless.com/CC BY-SA 3.0http://www.boundless.com/ Stock Valuation A company goes bankrupt and its assets are to be divided between its shareholders and debtholders. Which of the following, from highest priority to lowest, is the correct order of how the company's assets should be divided? A) Bondholders, preferred shareholders, common shareholders. B) Bondholders, common shareholders, preferred shareholders. C) Preferred shareholders, bondholders, common shareholders. D) Preferred shareholders, common shareholders, bondholders.

Free to share, print, make copies and changes. Get yours at www.boundless.com Stock Valuation Which of the following is NOT an actor in the stock market? A) Issuers. B) Intermediaries. C) Government regulators. D) Index fund.

Free to share, print, make copies and changes. Get yours at www.boundless.comwww.boundless.com Boundless - LO. "Boundless." CC BY-SA 3.0 http://www.boundless.com/CC BY-SA 3.0http://www.boundless.com/ Stock Valuation Which of the following is NOT an actor in the stock market? A) Issuers. B) Intermediaries. C) Government regulators. D) Index fund.

Free to share, print, make copies and changes. Get yours at www.boundless.com Stock Valuation Which of the following statements regarding the New York Stock Exchange is true? A) The NYSE is a primary market due to its market capitalization. B) To be listed on the NYSE, a company must have issued 10 million shares worth $100 million. C) The NYSE is an auction market. D) The NYSE has held true to its traditions and is not automated.

Free to share, print, make copies and changes. Get yours at www.boundless.comwww.boundless.com Boundless - LO. "Boundless." CC BY-SA 3.0 http://www.boundless.com/CC BY-SA 3.0http://www.boundless.com/ Stock Valuation Which of the following statements regarding the New York Stock Exchange is true? A) The NYSE is a primary market due to its market capitalization. B) To be listed on the NYSE, a company must have issued 10 million shares worth $100 million. C) The NYSE is an auction market. D) The NYSE has held true to its traditions and is not automated.

Free to share, print, make copies and changes. Get yours at www.boundless.com Stock Valuation Which of the following statements regarding the NASDAQ is true? A) The NASDAQ is known as the primary blue-chip stock market, catering mostly to established companies. B) The NASDAQ was popular with brokerages because it lowered stock spreads. C) All of these answers. D) The NASDAQ was the world's first electronic stock market.

Free to share, print, make copies and changes. Get yours at www.boundless.comwww.boundless.com Boundless - LO. "Boundless." CC BY-SA 3.0 http://www.boundless.com/CC BY-SA 3.0http://www.boundless.com/ Stock Valuation Which of the following statements regarding the NASDAQ is true? A) The NASDAQ is known as the primary blue-chip stock market, catering mostly to established companies. B) The NASDAQ was popular with brokerages because it lowered stock spreads. C) All of these answers. D) The NASDAQ was the world's first electronic stock market.

Free to share, print, make copies and changes. Get yours at www.boundless.com Stock Valuation Which of the following statements regarding stock indexes is true? A) A global index measures investor sentiment on the state of a national economy. B) An investor can invest directly in a stock index. C) All of these answers. D) A stock market index is computed using the prices of selected stocks.

Free to share, print, make copies and changes. Get yours at www.boundless.comwww.boundless.com Boundless - LO. "Boundless." CC BY-SA 3.0 http://www.boundless.com/CC BY-SA 3.0http://www.boundless.com/ Stock Valuation Which of the following statements regarding stock indexes is true? A) A global index measures investor sentiment on the state of a national economy. B) An investor can invest directly in a stock index. C) All of these answers. D) A stock market index is computed using the prices of selected stocks.

Free to share, print, make copies and changes. Get yours at www.boundless.com Stock Valuation After reviewing its prospects for the coming year, a company determines that it has no potential projects for the upcoming year that would exceed its hurdle rate. What should the company do with its profits from the current year? A) Liquidate the company and distribute all of the profits and assets to its investors. B) Retain the profits as savings for profitable projects in upcoming years. C) Distribute the majority of the profits to its investors as a dividend. D) Invest the profits in the projects anyway and hope that these new product lines exceed expectations.

Free to share, print, make copies and changes. Get yours at www.boundless.comwww.boundless.com Boundless - LO. "Boundless." CC BY-SA 3.0 http://www.boundless.com/CC BY-SA 3.0http://www.boundless.com/ Stock Valuation After reviewing its prospects for the coming year, a company determines that it has no potential projects for the upcoming year that would exceed its hurdle rate. What should the company do with its profits from the current year? A) Liquidate the company and distribute all of the profits and assets to its investors. B) Retain the profits as savings for profitable projects in upcoming years. C) Distribute the majority of the profits to its investors as a dividend. D) Invest the profits in the projects anyway and hope that these new product lines exceed expectations.

Free to share, print, make copies and changes. Get yours at www.boundless.com Stock Valuation A company a constant growth rate of 3%. The company's risk adjusted discount rate is 5%. The company has a $2 dividend. What is the per share value of the stock? A) $105 B) $51.50 C) $52.50 D) $103

Free to share, print, make copies and changes. Get yours at www.boundless.comwww.boundless.com Boundless - LO. "Boundless." CC BY-SA 3.0 http://www.boundless.com/CC BY-SA 3.0http://www.boundless.com/ Stock Valuation A company a constant growth rate of 3%. The company's risk adjusted discount rate is 5%. The company has a $2 dividend. What is the per share value of the stock? A) $105 B) $51.50 C) $52.50 D) $103

Free to share, print, make copies and changes. Get yours at www.boundless.com Stock Valuation Which of the following statements regarding capital distributions and investor preferences is correct? A) Investors seeking higher capital growth may prefer a lower payout ratio. B) All of these answers. C) Firms that require new capital to continue operations have limited growth potential. D) Investors seeking high current income and limited capital growth prefer high dividend payout ratios.

Free to share, print, make copies and changes. Get yours at www.boundless.comwww.boundless.com Boundless - LO. "Boundless." CC BY-SA 3.0 http://www.boundless.com/CC BY-SA 3.0http://www.boundless.com/ Stock Valuation Which of the following statements regarding capital distributions and investor preferences is correct? A) Investors seeking higher capital growth may prefer a lower payout ratio. B) All of these answers. C) Firms that require new capital to continue operations have limited growth potential. D) Investors seeking high current income and limited capital growth prefer high dividend payout ratios.

Free to share, print, make copies and changes. Get yours at www.boundless.com Stock Valuation Which of the following statements correctly defines a stock valuation method? A) The PEG Ratio is the Forward P/E ratio divided by the expected earnings growth rate. B) A company's market cap equals tits outstanding stock times its stock price plus the company's debt. C) Return on Invested Capital equals the pro forma net income divided by the company's total assets. D) Price to Earnings equals a company's earnings divided by the number of outstanding shares.

Free to share, print, make copies and changes. Get yours at www.boundless.comwww.boundless.com Boundless - LO. "Boundless." CC BY-SA 3.0 http://www.boundless.com/CC BY-SA 3.0http://www.boundless.com/ Stock Valuation Which of the following statements correctly defines a stock valuation method? A) The PEG Ratio is the Forward P/E ratio divided by the expected earnings growth rate. B) A company's market cap equals tits outstanding stock times its stock price plus the company's debt. C) Return on Invested Capital equals the pro forma net income divided by the company's total assets. D) Price to Earnings equals a company's earnings divided by the number of outstanding shares.

Free to share, print, make copies and changes. Get yours at www.boundless.com Stock Valuation Which of the following is a known limitation associated with valuing a company with dividends that have a nonconstant growth rate? A) An analyst can justify any valuation by fine-tuning the growth/discount assumptions. B) The models are sensitive to the differences between the dividend growth and discount factors. C) All of these answers. D) The valuation is based on company comparisons and requires analysis beyond a simple calculation.

Free to share, print, make copies and changes. Get yours at www.boundless.comwww.boundless.com Boundless - LO. "Boundless." CC BY-SA 3.0 http://www.boundless.com/CC BY-SA 3.0http://www.boundless.com/ Stock Valuation Which of the following is a known limitation associated with valuing a company with dividends that have a nonconstant growth rate? A) An analyst can justify any valuation by fine-tuning the growth/discount assumptions. B) The models are sensitive to the differences between the dividend growth and discount factors. C) All of these answers. D) The valuation is based on company comparisons and requires analysis beyond a simple calculation.

Free to share, print, make copies and changes. Get yours at www.boundless.com Stock Valuation Which of the following statements regarding corporate valuation approaches is true? A) The income approaches rely on using discount rates to determine a company's value. B) A downside of the asset-based approach of valuing a company is that it is not objective. C) The weighted average cost of capital is an approach used to find the value of a business. D) One of the variables in the Capital Asset Pricing Model is the cost of equity.

Free to share, print, make copies and changes. Get yours at www.boundless.comwww.boundless.com Boundless - LO. "Boundless." CC BY-SA 3.0 http://www.boundless.com/CC BY-SA 3.0http://www.boundless.com/ Stock Valuation Which of the following statements regarding corporate valuation approaches is true? A) The income approaches rely on using discount rates to determine a company's value. B) A downside of the asset-based approach of valuing a company is that it is not objective. C) The weighted average cost of capital is an approach used to find the value of a business. D) One of the variables in the Capital Asset Pricing Model is the cost of equity.

Free to share, print, make copies and changes. Get yours at www.boundless.com Stock Valuation A company has cost of equity of 8% and a dividend growth rate of 3%. Its dividends for next year is $2.20 per share. What should the stock's price be? A) $44.00 B) $4.40 C) $0.22 D) $27

Free to share, print, make copies and changes. Get yours at www.boundless.comwww.boundless.com Boundless - LO. "Boundless." CC BY-SA 3.0 http://www.boundless.com/CC BY-SA 3.0http://www.boundless.com/ Stock Valuation A company has cost of equity of 8% and a dividend growth rate of 3%. Its dividends for next year is $2.20 per share. What should the stock's price be? A) $44.00 B) $4.40 C) $0.22 D) $27

Attribution Wikipedia. "Shareholder." CC BY-SA 3.0 http://en.wikipedia.org/wiki/ShareholderCC BY-SA 3.0http://en.wikipedia.org/wiki/Shareholder Wikipedia. "Pre-emption right." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Pre-emption_rightCC BY-SA 3.0http://en.wikipedia.org/wiki/Pre-emption_right Wiktionary. "preemptive right." CC BY-SA 3.0 http://en.wiktionary.org/wiki/preemptive+rightCC BY-SA 3.0http://en.wiktionary.org/wiki/preemptive+right Wikipedia. "Preemption." CC BY-SA 3.0 http://en.wikipedia.org/wiki/PreemptionCC BY-SA 3.0http://en.wikipedia.org/wiki/Preemption Wikipedia. "Stock exchange." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Stock_exchangeCC BY-SA 3.0http://en.wikipedia.org/wiki/Stock_exchange Wikipedia. "Pre-emption right." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Pre-emption_rightCC BY-SA 3.0http://en.wikipedia.org/wiki/Pre-emption_right Wikipedia. "Stock Exchange." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Stock%20ExchangeCC BY-SA 3.0http://en.wikipedia.org/wiki/Stock%20Exchange Wikipedia. "Preemption." CC BY-SA 3.0 http://en.wikipedia.org/wiki/PreemptionCC BY-SA 3.0http://en.wikipedia.org/wiki/Preemption Wiktionary. "dividend." CC BY-SA 3.0 http://en.wiktionary.org/wiki/dividendCC BY-SA 3.0http://en.wiktionary.org/wiki/dividend Wiktionary. "equity." CC BY-SA 3.0 http://en.wiktionary.org/wiki/equityCC BY-SA 3.0http://en.wiktionary.org/wiki/equity Wikipedia. "Common stock." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Common_stockCC BY-SA 3.0http://en.wikipedia.org/wiki/Common_stock Wikipedia. "Common stock." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Common%20stockCC BY-SA 3.0http://en.wikipedia.org/wiki/Common%20stock Wikipedia. "Corporate valuation." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Corporate_valuationCC BY-SA 3.0http://en.wikipedia.org/wiki/Corporate_valuation Wikipedia. "net asset value." CC BY-SA 3.0 http://en.wikipedia.org/wiki/net%20asset%20valueCC BY-SA 3.0http://en.wikipedia.org/wiki/net%20asset%20value Wikipedia. "discounted cash flow." CC BY-SA 3.0 http://en.wikipedia.org/wiki/discounted%20cash%20flowCC BY-SA 3.0http://en.wikipedia.org/wiki/discounted%20cash%20flow Wiktionary. "corporation." CC BY-SA 3.0 http://en.wiktionary.org/wiki/corporationCC BY-SA 3.0http://en.wiktionary.org/wiki/corporation Wikipedia. "Pre-emption right." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Pre-emption_rightCC BY-SA 3.0http://en.wikipedia.org/wiki/Pre-emption_right Free to share, print, make copies and changes. Get yours at www.boundless.com Stock Valuation

Wikipedia. "Stock." CC BY-SA 3.0 http://en.wikipedia.org/wiki/StockCC BY-SA 3.0http://en.wikipedia.org/wiki/Stock Wikipedia. "Shareholder." CC BY-SA 3.0 http://en.wikipedia.org/wiki/ShareholderCC BY-SA 3.0http://en.wikipedia.org/wiki/Shareholder Wiktionary. "shareholder." CC BY-SA 3.0 http://en.wiktionary.org/wiki/shareholderCC BY-SA 3.0http://en.wiktionary.org/wiki/shareholder Wikipedia. "Stock." CC BY-SA 3.0 http://en.wikipedia.org/wiki/StockCC BY-SA 3.0http://en.wikipedia.org/wiki/Stock Wikipedia. "Common stock." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Common_stockCC BY-SA 3.0http://en.wikipedia.org/wiki/Common_stock Wikipedia. "Preferred stock." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Preferred_stockCC BY-SA 3.0http://en.wikipedia.org/wiki/Preferred_stock Wikipedia. "Common stock." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Common%20stockCC BY-SA 3.0http://en.wikipedia.org/wiki/Common%20stock Wikipedia. "Preferred Stock." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Preferred%20StockCC BY-SA 3.0http://en.wikipedia.org/wiki/Preferred%20Stock Wikipedia. "Bond (finance)." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Bond_%2528finance%2529CC BY-SA 3.0http://en.wikipedia.org/wiki/Bond_%2528finance%2529 Wikipedia. "Stock." CC BY-SA 3.0 http://en.wikipedia.org/wiki/StockCC BY-SA 3.0http://en.wikipedia.org/wiki/Stock Wikipedia. "Preferred stock." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Preferred_stockCC BY-SA 3.0http://en.wikipedia.org/wiki/Preferred_stock Wikipedia. "Common stock." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Common_stockCC BY-SA 3.0http://en.wikipedia.org/wiki/Common_stock Wikipedia. "Preferred Stock." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Preferred%20StockCC BY-SA 3.0http://en.wikipedia.org/wiki/Preferred%20Stock Wikipedia. "Common stock." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Common%20stockCC BY-SA 3.0http://en.wikipedia.org/wiki/Common%20stock Wiktionary. "bond." CC BY-SA 3.0 http://en.wiktionary.org/wiki/bondCC BY-SA 3.0http://en.wiktionary.org/wiki/bond Wikipedia. "The Dividend Decision." CC BY-SA 3.0 http://en.wikipedia.org/wiki/The_Dividend_DecisionCC BY-SA 3.0http://en.wikipedia.org/wiki/The_Dividend_Decision Wiktionary. "clientele." CC BY-SA 3.0 http://en.wiktionary.org/wiki/clienteleCC BY-SA 3.0http://en.wiktionary.org/wiki/clientele Wikipedia. "Stock valuation." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Stock_valuationCC BY-SA 3.0http://en.wikipedia.org/wiki/Stock_valuation Wikipedia. "break-even." CC BY-SA 3.0 http://en.wikipedia.org/wiki/break-evenCC BY-SA 3.0http://en.wikipedia.org/wiki/break-even Free to share, print, make copies and changes. Get yours at www.boundless.com Stock Valuation

Wikipedia. "DCF models." CC BY-SA 3.0 http://en.wikipedia.org/wiki/DCF%20modelsCC BY-SA 3.0http://en.wikipedia.org/wiki/DCF%20models Wikipedia. "Dividend discount model." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Dividend_discount_modelCC BY-SA 3.0http://en.wikipedia.org/wiki/Dividend_discount_model Wikipedia. "Miller-Modigliani hypothesis." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Miller-Modigliani%20hypothesisCC BY-SA 3.0http://en.wikipedia.org/wiki/Miller-Modigliani%20hypothesis Wikipedia. "Preferred stock." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Preferred_stockCC BY-SA 3.0http://en.wikipedia.org/wiki/Preferred_stock Wikipedia. "Preferred stock." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Preferred_stockCC BY-SA 3.0http://en.wikipedia.org/wiki/Preferred_stock Wikipedia. "Preferred stock." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Preferred_stockCC BY-SA 3.0http://en.wikipedia.org/wiki/Preferred_stock Wikipedia. "Preferred stock." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Preferred_stockCC BY-SA 3.0http://en.wikipedia.org/wiki/Preferred_stock Wikipedia. "Callable shares." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Callable%20sharesCC BY-SA 3.0http://en.wikipedia.org/wiki/Callable%20shares Wikipedia. "Convertible preferred stock." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Convertible%20preferred%20stockCC BY-SA 3.0http://en.wikipedia.org/wiki/Convertible%20preferred%20stock Wikipedia. "Cumulative Dividends." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Cumulative%20DividendsCC BY-SA 3.0http://en.wikipedia.org/wiki/Cumulative%20Dividends Wikipedia. "S&P 500." CC BY-SA 3.0 http://en.wikipedia.org/wiki/S%2526P_500CC BY-SA 3.0http://en.wikipedia.org/wiki/S%2526P_500 Wikipedia. "Dow Jones Industrial Average." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Dow_Jones_Industrial_AverageCC BY-SA 3.0http://en.wikipedia.org/wiki/Dow_Jones_Industrial_Average Wikipedia. "Conference Board Leading Economic Index." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Conference_Board_Leading_Economic_IndexCC BY-SA 3.0 http://en.wikipedia.org/wiki/Conference_Board_Leading_Economic_Index Wikipedia. "Stock market index." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Stock_market_indexCC BY-SA 3.0http://en.wikipedia.org/wiki/Stock_market_index Wikipedia. "Russell 2000." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Russell_2000CC BY-SA 3.0http://en.wikipedia.org/wiki/Russell_2000 Wikipedia. "FTSE 100." CC BY-SA 3.0 http://en.wikipedia.org/wiki/FTSE_100CC BY-SA 3.0http://en.wikipedia.org/wiki/FTSE_100 Wikipedia. "Common stock." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Common%20stockCC BY-SA 3.0http://en.wikipedia.org/wiki/Common%20stock Wiktionary. "market capitalization." CC BY-SA 3.0 http://en.wiktionary.org/wiki/market+capitalizationCC BY-SA 3.0http://en.wiktionary.org/wiki/market+capitalization Wiktionary. "weighted average." CC BY-SA 3.0 http://en.wiktionary.org/wiki/weighted+averageCC BY-SA 3.0http://en.wiktionary.org/wiki/weighted+average Free to share, print, make copies and changes. Get yours at www.boundless.com Stock Valuation

Wikipedia. "Stock valuation." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Stock_valuationCC BY-SA 3.0http://en.wikipedia.org/wiki/Stock_valuation Wiktionary. "GAAP." CC BY-SA 3.0 http://en.wiktionary.org/wiki/GAAPCC BY-SA 3.0http://en.wiktionary.org/wiki/GAAP Wikipedia. "risk premium." CC BY-SA 3.0 http://en.wikipedia.org/wiki/risk%20premiumCC BY-SA 3.0http://en.wikipedia.org/wiki/risk%20premium Wikipedia. "capital gains." CC BY-SA 3.0 http://en.wikipedia.org/wiki/capital%2520gainsCC BY-SA 3.0http://en.wikipedia.org/wiki/capital%2520gains Wikipedia. "Dividend payout ratio." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Dividend_payout_ratioCC BY-SA 3.0http://en.wikipedia.org/wiki/Dividend_payout_ratio Connexions. "Dividend and Market Value Ratios." CC BY 3.0 http://cnx.org/content/m15611/latest/CC BY 3.0http://cnx.org/content/m15611/latest/ Wikipedia. "Preferred stock." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Preferred_stockCC BY-SA 3.0http://en.wikipedia.org/wiki/Preferred_stock Wikipedia. "Preferred stock." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Preferred_stockCC BY-SA 3.0http://en.wikipedia.org/wiki/Preferred_stock Wikipedia. "Preferred stock." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Preferred_stockCC BY-SA 3.0http://en.wikipedia.org/wiki/Preferred_stock Wiktionary. "bond." CC BY-SA 3.0 http://en.wiktionary.org/wiki/bondCC BY-SA 3.0http://en.wiktionary.org/wiki/bond Wikipedia. "Preferred Stock." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Preferred%20StockCC BY-SA 3.0http://en.wikipedia.org/wiki/Preferred%20Stock Wikipedia. "Nasdaq Composite." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Nasdaq_CompositeCC BY-SA 3.0http://en.wikipedia.org/wiki/Nasdaq_Composite Wikipedia. "NASDAQ." CC BY-SA 3.0 http://en.wikipedia.org/wiki/NASDAQCC BY-SA 3.0http://en.wikipedia.org/wiki/NASDAQ Wikipedia. "FINRA." CC BY-SA 3.0 http://en.wikipedia.org/wiki/FINRACC BY-SA 3.0http://en.wikipedia.org/wiki/FINRA Wikipedia. "Preferred stock." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Preferred_stockCC BY-SA 3.0http://en.wikipedia.org/wiki/Preferred_stock Wikipedia. "Preferred Stock." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Preferred%20StockCC BY-SA 3.0http://en.wikipedia.org/wiki/Preferred%20Stock Wiktionary. "liquidation." CC BY-SA 3.0 http://en.wiktionary.org/wiki/liquidationCC BY-SA 3.0http://en.wiktionary.org/wiki/liquidation Wikipedia. "Hedge funds." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Hedge_fundsCC BY-SA 3.0http://en.wikipedia.org/wiki/Hedge_funds Wikipedia. "Mutual fund." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Mutual_fundCC BY-SA 3.0http://en.wikipedia.org/wiki/Mutual_fund Free to share, print, make copies and changes. Get yours at www.boundless.com Stock Valuation

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