a. What are the relevant cash flows for valuing a share of common stock? b. Does the
Question:
a. What are the relevant cash flows for valuing a share of common stock?
b. Does the value of a share of stock depend on how long you expect to keep it?
c. What is the value of a share of stock when the dividend grows at a constant rate?
d. What is a “target price” on a stock? How is it determined?
Step by Step Answer:
a The relevant cash flows for val uing a share of common stock include the dividends paid by the com...View the full answer
Essentials Of Corporate Finance
ISBN: 9781265414962
11th Edition
Authors: Stephen Ross, Randolph Westerfield, Bradford Jordan
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Stocks (also known as equities) are securities that represent ownership in a company. They are issued by companies to raise capital, and when an individual buys stocks, they become a shareholder in that company. Investing in stocks can be a way for individuals to potentially earn a return on their investment through dividends and capital appreciation. However, investing in stocks also carries a level of risk, as the value of the stock can fluctuate based on various factors such as the financial performance of the company and general market conditions. For companies, issuing stocks can be a way to raise funds for growth and expansion. When a company goes public by issuing an initial public offering (IPO), it can raise significant capital by selling ownership stakes to the public. Companies can also issue additional stock offerings to raise additional capital as needed.
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