The Value of a Share of Common Equity Should Equal

question 45

Short Answer

The value of a share of common equity should equal the present value of the _____________________________________________ that the shareholders will receive.

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Definitions:

Taxable Income

The portion of an individual's or organization's income that is subject to taxation by governing authorities.

Horizontal Equity

Horizontal equity is a principle in taxation that dictates that individuals with similar income and assets should pay the same amount in taxes.

Vertical Equity

A principle in taxation that individuals with a higher ability to pay should contribute more taxes.

Progressivity

Refers to a tax system in which the tax rate increases as the taxable amount increases.