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Fundamentals of Corporate Finance by Robert Parrino

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8

Stock Valuation

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Learning Objectives

images List and describe the four types of secondary markets.

images Explain why many financial analysts treat preferred stock as a special type of bond rather than as an equity security.

images Describe how the general dividend-valuation model values a share of stock.

images 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.

images Explain why g must be less than R in the constant-growth dividend model.

images 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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