Question: How can we say that price equals to the present value of all future cash flows when many actual investors may be seeking capital gains

How can we say that price equals to the present value of all future cash flows when many actual investors may be seeking capital gains and planning to hold their shares for only a year or two? Explain.

Step by Step Solution

★★★★★

3.54 Rating (157 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

The value of a share of common stock equals the presen... View full answer

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Document Format (1 attachment)

68-B-A-T-V-M (1309).xlsx

300 KBs Excel File

Students Have Also Explored These Related Accounting Questions!

Since graduating with an Information Technology diploma, two years ago, Edna has been working in her aunts restaurant as a hostess/cashier. In her spare time, she has created an easyto-use computer...

The present value of JECK Co.s expected free cash flows is $100 million. If JECK has $30 million in debt, $6 million in cash, and 2 million shares outstanding, what is its share price?

When must a company record the present value of the costs of future asset retirement? How is the present value calculated?

The present value of interest tax shields is often written as TcD, where D is the amount of debt and Tc is the marginal corporate tax rate. Under what assumptions is this present value correct?

2-Stock Quotes. Go to finance.yahoo.com and get trading quotes for IBM. a. What is the latest stock price and market cap? b. What is the bid-ask spread? c. What is IBMs dividend payment and dividend...

Dividend Discount Model. How can we say that price equals the present value of all future dividends when many actual investors may be seeking capital gains and planning to hold their shares for only...

8) How can we say that the price of a stock equals the present value of all future dividends when many actual investors may be seeking capital gains and planning to hold their shares for only a year...

5. Dividend Discount Model. How can we say that price equals the present value of all future dividends when many actual investors may be seeking capital gains and planning to hold their shares for...

Case Analysis 1. Compute the yield to maturity of Land'o'Toys' bonds before the purchase announcement and use it to determine the likely current bond rating. (Compare YTM to the table on p. 269)....

3 COLLEGE ALGEBRA - TRIGONOMETRY Business and Finance (MAT115) This course will start with a review of basic algebra (factoring, solving linear equations, and equalities, etc.) and proceed to a study...

Write a summary of the abstract below ABSTRACT: Floods cause a lot of damage, especially in developing countries, and so flood predictions are some of the best candidates for improvement by...

The Zwatch Company manufactures trendy, high-quality moderately priced watches. As Zwatchs senior financial analyst, you are asked to recommend a method of inventory costing. The CEO will use your...

What could be a good finding analysis based assessment feedback of conflict management tendencies, that showed my wife perceives my conflict management strategy / tendency as compromising according...

Zeidman Security Services Co offers security services to business clients. The trial balance for Zeidman Security Services Co. has been prepared on the end-of-period spreadsheet (work sheet) for the...

The capacity of a storage battery, such as those used in automobile electrical systems, is rated in ampere-hours (A h). A 50- A h battery can supply a current of 50 A for 1.0 h, or 25 A for 2.0 h,...

From the following list, identify the accounts that should be closed to Income Summary at the end of the fiscal year: a. Accounts Receivable b. Accumulated DepreciationEquipment c. Depreciation...

A 3.00-m length of copper wire at 20oC has a 1.20-m-long section with diameter 1.60 mm and a 1.80-m-long section with diameter 0.80 mm. There is a current of 2.5 m A in the 1.60-mm diameter section....

What is the purpose of technical analysis?

Note the two blank graphs in Figure below. On graph (a), assume MM are right, and plot the relationship between financial leverage (debt-equity ratio) and (i) The rates of return on debt and equity...

Gaucho Services starts life with all-equity financing and a cost of equity of 14%. Suppose it refinances to the following market-value capital structure: Use MMs proposition 2 to calculate the new...

Executive Cheese has issued debt with a market value of $100 million and has outstanding 15 million shares with a market price of $10 a share. It now announces that it intends to issue a further $60...

Need help with statistics homework please !! 3. Determine ; and o; from the given parameters pulation and sample size. H = 78, G = 18, n=36 4. A simple random sample of size n = 49 is obtained from a...

Daddi Mac, Inc., doesnt face any taxes and has $285.60 million in assets, currently financed entirely with equity. Equity is worth $34 per share, and book value of equity is equal to market value of...

If the total value of the assets of the accounting entity is $4,350,000 and the total liabilities of the accounting entity are $1,235,000 the stockholders' equity in the accounting entity is?