FIN-3403 Lecture Notes - Lecture 8: Dividend Yield, Proxy Voting, Cumulative Voting
Document Summary
Possibilities for director election rules: straight (majority) voting, staggered elections, cumulative voting, proxy voting. Accounting for stock: book value, = common stock + additional paid-in capital + retained earnings, market value, = price per share in market trade. Zero-growth model: dividend cash flow is always the same, therefore the stream of dividends is a perpetuity, or d0= d(cid:1005)= d(cid:1006) , share price is the pv of a perpetuity, using dividends as c, pv p ann= c/r. Multiphase growth: assumes phases of time with different dividend growth rates with a final constant or zero growth phase that lasts forever. Components of stock return: using the constant dividend growth model, rearrange p0= d1/(r-g) to find r, r= (d1/p0) + g, dividend yield= d1/p0, capital gains yield= g, r= dividend yield + capital gains yield. Stock valuation using earnings and sales multiples: using p/e ratio, p/e= price per share/earnings per share, price per share= p/e x earnings per share.
