Equity Capital

Question 1

What is equity ?

Answer 1

Difference between the value of assets and liabilities incurred acquiring assets

Part of asset value owned “free and clear “ of financial obligations.

Question 2

Explain equity in corporate equity ?

Answer 2

Aim of private enterprise - increase the value of equity

Increase wealth connected to corporate ownership

Enshrined in the declaration.

Question 3

What is the characteristics of equity ?

Answer 3

Equity investors benefit from ownership conditional on corporations meeting others claims

Equity can be used to meet claims

Shareholders have no legal if firms fails

Question 4

The dividend payment process , estate the 4 key dates

Answer 4

Announcement day
Record date
Ex-dividend
Dividend payment date

Question 5

Análise the effect of the payments of dividends

Answer 5

In the announcement and record date is no effect

Ex-dividend period -shares prices fall by equivalent of the dividend

Dividend payment date - no effect because dividend payment as reduction of company assets already accounted for in ex -dividend price

After dividend payment - share price gradually rises

Question 6

What asset valuation depend on ?

Answer 6

Periodic cash flows
Term to maturity
Required/expected return

Question 7

What is the formula of constant dividend growth?

Answer 7

Po= do( 1+g)/(1+r) + same by with power of 2 both sides such as do(1+g)^2/(1+r)^2