Stock valuation - Common stock valuation

6 important questions on Stock valuation - Common stock valuation

What are the 3 points of a 'perfect' market, efficient-market hypothesis?

1. equilibrium
2. security prices fully reflecht available information and react swiftly to new information.
3. fully and fairly prices, investors won't waste time.

What is the zero-growth model?

An approach to dividend valuation that assumes a constant, nongrowing dividend stream.

What is a constant-growth model?

A widely cited dividend valuation approach that assumes that dividend will grow at a constant rate, but a rate that is less than the required return.
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What is the free cash flow valuation model?

A model that determines the value of an entire company as the present value of its expected free cash flows discounted at the firm's weighted average cost of capital, which is its expected average future cost of funds over the long run.

What is the book value per share?

the amount per share of common stock that would be received if all of the firm's assets were sold for their exact book value and the proceeds remaining after paying all liabilities were divided among the common stockholder.

What is the liquidation value per share?

The actual amount per share of common stock that would be received if all of the firm's assets were sold for their market value, liabilities were paid, and any remaining money were divided among the common stockholders.

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