FIN 010 Lecture Notes - Lecture 13: Preferred Stock, Treasury Stock, Financial Statement
Document Summary
It can be a difficult process as it involves a fairly accurate method of estimating future profits and payouts for dividends. When the calculation is collected cash flows are simply discounted back using the. Common equity rate, which yields a value calculation. Determining the value of an ipo share is slightly more complicated, because the issuing firm is a private company or association with no record of its own historical price. Usually, participants in this problem market rely on one of several different strategies to get around. The first is to serve as a proxy for equivalent public corporations. And, if abc co has many publicly traded rivals in its market sector, it can investigate how those companies have operated over a period of time and what specific differences exist between those companies and abc co. The stock price should then be set in relation to what the comparables say may be a reasonable value.
