Dividend Valuation
Dividend refers to a reward or cash that a company gives to its shareholders out of the profits. Dividends can be issued in various forms such as cash payment, stocks, or in any other form as per the company norms. It is usually a part of the profit that the company shares with its shareholders.
Dividend Discount Model
Dividend payments are generally paid to investors or shareholders of a company when the company earns profit for the year, thus representing growth. The dividend discount model is an important method used to forecast the price of a company’s stock. It is based on the computation methodology that the present value of all its future dividends is equivalent to the value of the company.
Capital Gains Yield
It may be referred to as the earnings generated on an investment over a particular period of time. It is generally expressed as a percentage and includes some dividends or interest earned by holding a particular security. Cases, where it is higher normally, indicate the higher income and lower risk. It is mostly computed on an annual basis and is different from the total return on investment. In case it becomes too high, indicates that either the stock prices are going down or the company is paying higher dividends.
Stock Valuation
In simple words, stock valuation is a tool to calculate the current price, or value, of a company. It is used to not only calculate the value of the company but help an investor decide if they want to buy, sell or hold a company's stocks.
1. Explain what capital structure theory attempts to do and demonstrate useful lessons that can be learned from capital structure theory.
2. Using the
3. Explain the difference between financial risk and business risk? What factors influence a firm’s business and financial risk?
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Teachings from the capital structure:
The description of the capital structure makes it clear that the ratio that the firm invests in its stocks and debts would be equal to 1:2. Debt ought to be higher than equity. But a less-risky investment approach should also be maintained by the company.
Prior to pursuing any form of capital structure, one ought to be cautious. This is since the capital structure strategy is the cornerstone for the whole organization. The approach should also be versatile and long-lasting. One should be aware that even minute shifts in the structure of capital will have a significant effect on the firm's entire hazard and return.
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