The dividend-growth model determines what an investor thinks a stock is worth but not
necessarily its price.
If suppliers want to discourage the use of trade credit, they may shorten the pay period
(i.e., offer 2/10, n25 instead of 2/10, n30).
The value of a common stock depends in part on the expected growth in dividends.
If a firm distributes a larger proportion of its earnings, the external need for finance is
reduced.
Low correlation among cash inflows is associated with lower net present values.
What is the value of a preferred stock that pays an annual dividend of $3 a share and
competitive yields are 5%, 10%, and 15%?
Large certificates of deposit in units of $500,000 are insured by FDIC.
The lessor owns the asset while the lessee has the use of the asset.
For an investment to diversify a portfolio, its returns must be positively correlated with
other returns.
An index fund seeks to outperform a specific stock index like the S&P 500.
The ease of transferring ownership is one advantage of the publicly held corporation.
A firm will prefer to issue preferred stock rather than debt because the dividend is
tax-deductible.
You bought a Picasso for $50,000 and sold it after 5 years for $88,000. What was the
annual return on the investment?
The more lenient the terms of credit, the riskier is the firm’s credit policy.
Discounting refers to the process of bringing the future back to the present.
Trade credit is primarily used by retailers to finance accounts receivable.