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21 Cards in this Set
- Front
- Back
A document giving one person the authority to act for another, typically the power to vote shares of common stock. |
Proxy |
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An attempt by a person or group to gain control of a firm by getting its stockholders to grant that person or group the authority to vote its shares to replace the current management. |
Proxy fight |
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An action whereby a person or group succeeds in ousting a firm’s management and taking control of the company. |
Takeover |
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A provision in the corporate charter or bylaws that gives common stockholders the right to purchase on a pro rata basis new issues of common stock (or convertible securities). |
Preemtive right |
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Common stock that is given a special designation such as Class A or Class B to meet special needs of the company. |
Classified stock |
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Stock owned by the firm’s founders that enables them to maintain control over the company without having to own a majority of stock. |
Founders shares |
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A representative investor whose actions reflect the beliefs of those people who are currently trading a stock. It is the marginal investor who determines a stock’s price. |
Marginal investor |
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The price at which a stock sells in the market. |
Market price,po |
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The expected rate of growth in dividends per share. |
Growth rate, g |
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The minimum rate of return on a common stock that a stockholder considers acceptable. |
Required Rate of Return,rs |
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The rate of return on a common stock that a stockholder expects to receive in the future. |
Expected rate of return |
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The rate of return on a common stock actually received by stockholders in some past period; rs may be greater or less than ^ rs and/or rs. |
Actual (Realized) Rate of Return, rs |
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The expected dividend divided by the current price of a share of stock. |
Dividend Yield |
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The capital gain during a given year divided by the beginning price. |
Capital Gains Yield |
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The sum of the expected dividend yield and the expected capital gains yield. |
Expected Total Return |
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Used to find the value of a constant growth stock |
Constant Growth (Gordon) Model |
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A common stock whose future dividends are not expected to grow at all; that is, g = 0. |
Zero Growth Stock |
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The part of the firm’s life cycle in which it grows much faster than the economy as a whole. |
Supernormal (Nonconstant) Growth |
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The date when the growth rate becomes constant. At this date, it is no longer necessary to forecast the individual dividends. |
Horizon (Terminal) Date |
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The value at the horizon date of all dividends expected thereafter. |
Horizon (Continuing) Value |
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A valuation model used as an alternative to the discounted dividend model to determine a firm’s value, especially one with no history of dividends, or the value of a division of a larger firm. |
Corporate Valuation Model |