Questions from Financial Management

Q: What factor or factors make the valuation of common stocks more complicated

What factor or factors make the valuation of common stocks more complicated than the valuation of bonds and preferred stocks?

Q: According to the general dividend valuation model, a firm that reinvests

According to the general dividend valuation model, a firm that reinvests all its earnings and pays no cash dividends can still have a common stock value greater than zero. How is this possible?

Q: Explain the relationship between financial decisions and shareholders’ wealth.

Explain the relationship between financial decisions and shareholders’ wealth.

Q: Explain how each of the following factors would affect the valuation of

Explain how each of the following factors would affect the valuation of a firm’s common stock, assuming that all other factors remain constant: a. The general level of interest rates shifts upward, ca...

Q: In the context of the constant growth dividend valuation model, explain

In the context of the constant growth dividend valuation model, explain what is meant by a. Dividend yield b. Price appreciation yield

Q: Explain why the valuation models for a perpetual bond, preferred stock

Explain why the valuation models for a perpetual bond, preferred stock, and common stock with constant dividend payments (zero growth) are virtually identical.

Q: Explain how diversification can reduce the risk of a portfolio of assets

Explain how diversification can reduce the risk of a portfolio of assets to below the weighted average of the risk of the individual assets.

Q: Explain how the book value per share of common stock can change

Explain how the book value per share of common stock can change over time.

Q: What is the difference between majority voting and cumulative voting?

What is the difference between majority voting and cumulative voting?

Q: What are the primary functions served by investment bankers?

What are the primary functions served by investment bankers?