For dividend-paying corporations, stockholder returns consist of both... - correct answer ✔✔both
dividends (all years) and capital gains or losses.
What are the methods used by corporations to sell new shares of common stock? - correct answer ✔✔-
Rights offering
- Public offering
- Private placement
- Employee stock purchase plan
- Dividend reinvestment plan (DRIP)
- Direct purchase plan
What must all not for profit businesses have? - correct answer ✔✔have "equity" capital, but it is not
supplied by stockholders.
Where does start up equity come from for NFP businesses? - correct answer ✔✔Religious organizations
Governmental entities
Contributions (Mayo Clinic)
Where does ongoing equity come from for NFP businesses - correct answer ✔✔Profits
Contributions
Grants
What are the three categories can for-profit businesses be classified into for valuation? - correct answer
✔✔- Start-up businesses, which can be valued (roughly) by option pricing models.
- Young businesses, which can be valued on the basis of their expected operating cash flows.
- Mature businesses, which can be valued on the basis of their expected dividend stream. We will
illustrate the dividend valuation model here.
, In the dividend valuation model... - correct answer ✔✔the value of a share of stock is the present value
of the expected cash flow stream to shareholders.
- In general, this stream consists of dividends and a future selling price.
Clearly, most "real world" dividend-paying stocks do not... - correct answer ✔✔exhibit constant growth.
When will investors buy a security? - correct answer ✔✔- Expected rate of return exceeds the required
rate of return.
- Value exceeds the current price.
Why might the major stock and bond markets be efficient? - correct answer ✔✔Major financial firms
have thousands of well-qualified analysts with immediate access to information along with billions of
dollars to invest. Thus, new information is almost instantaneously reflected in current prices.
what is the only way to obtain a higher return in efficient markets? - correct answer ✔✔assume more
risk
What are investment alternatives to obtain higher return? - correct answer ✔✔Stocks and bonds
Besides debt, the other major source of capital is... - correct answer ✔✔equity financing
In for-profit (investor-owned) businesses, equity is supplied by.. - correct answer ✔✔owners
In not-for-profit (NFP) businesses, "equity" (sometimes called fund capital) is supplied by.. - correct
answer ✔✔The community
What is capital? - correct answer ✔✔The funds used to finance a business's assets
What is capital structure? - correct answer ✔✔the financing mix on the right side of the balance sheet
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