BU383 Chapter 8: Chapter 8 - Stocks.pdf
Document Summary
Assets are valued by computing the pv of their future cash flows. Equity contract: a contract between the firm and an investor that gives the investor a proportion of. Chapter 8 stocks ownership of the firm"s assets in exchange for a current payment. Shareholders control firm by electing board of directors: election at annual meeting via proxies, directors have fiduciary responsibility to shareholders, directors choose senior management, directors choose whether to pay common dividends. Shareholder have a residual claim to firm"s assets. Intrinsic value (iv: subjective value, variety of models. Market price (mp: consensus value of all potential traders. Iv < mp sell or short sell. Iv = mp hold or fairly priced. Stocks/shares: securities issued by incorporated companies represents equity/ownership[, so a stockholder is an owner of the company and can control the corporation & share company profits. Each shareholder gets one vote for each share they own majority shareholders get more control.
