Topical review
- Discuss the advantages/benefits of owning stock
- Define the three important dates related to dividend payments
- Value stocks as the PV of future expected dividends – general DDM formula
- Find the market capitalization rate of stocks - CAPM (See ch. 6)
- Use the Gordon constant growth dividend discount model to value stocks
- Segregate total stock returns into dividend and capital gains yields
- Understand the assumptions and shortfalls of the constant growth DDM
- Use the multi-stage DDM to value stocks whose dividends grow at non-constant rates in the short term
- Use market multiples to value stocks that do not pay dividends
- Explain the implications of the efficient market hypothesis
- Differentiate three forms of the efficient market hypothesis based on the type of information embedded in stock prices
- Stock definitions: announcement/declaration date, ex-dividend date, payable date, proxy, market equilibrium, efficient market hypothesis, weak/semi-strong/strong form market efficiency
- Valuation: intrinsic value, Gordon model, multi-stage DDM, market multiple analysis
ST-2, # 2,
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