8
Stock Valuation
Learning Objectives
List and describe the four types of secondary markets.
Explain why many financial analysts treat preferred stock as a special type of bond rather than as an equity security.
Describe how the general dividend-valuation model values a share of stock.
Discuss the assumptions that are necessary to make the general dividend-valuation model easier to use, and use the model to compute the value of a firm's stock.
Explain why g must be less than R in the constant-growth dividend model.
Explain how valuing preferred stock with a stated maturity differs from valuing preferred stock with no maturity, and calculate the price of a share of preferred stock under both conditions.
Finding the actual market price of a share of publicly traded stock is easy. You ...
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