Provide the Rationale for Using Expected Dividends in a Valuation

question 25

Essay

Provide the rationale for using expected dividends in a valuation model.

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Definitions:

Noncumulative

Pertaining to dividends, a feature allowing a company not to pay dividends in arrears to its shareholders.

Treasury Stock

Equities that were once sold to investors and later re-purchased by the entity that issued them, effectively reducing the quantity of stocks traded publicly.

Par Value

Par value is a nominal value assigned to a security, such as a stock or bond, at issuance, often used to determine legal capital or accounting value rather than market value.

Stock Dividend

A payment to shareholders in the form of additional shares of stock rather than cash.