VoyForums
[ Show ]
Support VoyForums
[ Shrink ]
VoyForums Announcement: Programming and providing support for this service has been a labor of love since 1997. We are one of the few services online who values our users' privacy, and have never sold your information. We have even fought hard to defend your privacy in legal cases; however, we've done it with almost no financial support -- paying out of pocket to continue providing the service. Due to the issues imposed on us by advertisers, we also stopped hosting most ads on the forums many years ago. We hope you appreciate our efforts.

Show your support by donating any amount. (Note: We are still technically a for-profit company, so your contribution is not tax-deductible.) PayPal Acct: Feedback:

Donate to VoyForums (PayPal):

[ Login ] [ Contact Forum Admin ] [ Main index ] [ Post a new message ] [ Search | Check update time | Archives: 1, [2] ]

[ Next Thread | Previous Thread | Next Message | Previous Message ]

Date Posted: 08:07:13 04/19/02 Fri
Author: Dr. D.
Subject: Re: a couple more...(I think on Spring, 1999, #'s 1 and 11)
In reply to: NathanP 's message, "a couple more..." on 19:30:42 04/18/02 Thu

Nathan:

I assume you're still on the Spring, 99 final. If so, here we go...
>#1: Is "B" incorrect b/c some of the NI could have
>gone to RE? Is "A" wrong b/c Pref Stock owners get
>paid first?
Assume that the firm increases dividends but becomes more risky. Due to the increased risk, the required rate of return is higher. If the RROR increases enough, the greater "discounting effect" will more than offset the higher expected future cash flow. Remember- the price is the PV and the PV is based not only on the future cash flow, but on the discount rate.

>#11: I understand why 'E' is correct- why is 'A'
>incorrect?

If it stops growing, it goes from a positive growth rate to a zero growth rate. You can't use the CDG model if the growth rate changes. You CAN use the CDG model at the point where the growth rate changes to get the price AT THAT TIME, but that's not the same as using the model to get TODAY's price.
>Thanks
>Nathan

[ Next Thread | Previous Thread | Next Message | Previous Message ]
[ Contact Forum Admin ]

Forum timezone: GMT-8
VF Version: 3.00b, ConfDB:
Before posting please read our privacy policy.
VoyForums(tm) is a Free Service from Voyager Info-Systems.
Copyright © 1998-2019 Voyager Info-Systems. All Rights Reserved.