FIN 200 exam 2
net present value
the difference between an investment's market value and its costs
discount cash flow (DCF) valuation
calculating the present value of future cash flow to determine its value today
the process of valuing an investment by discounting its future cash flows
payback period
the amount of time required for an investment to generate cash flows sufficient to recover its initial cost
average accounting return (AAR)
an investment's average net income divided by its average book value
internal rate of return (IRR)
the discount rate that makes the net present value of an investment zero
net present value profile
a graphical representation of the relationship between an investment's net present value and various
discount rates
multiple rates of return
the possibility that more than one discount rate will make the net present value of an investment zero
mutually exclusive investment decisions
a situation where taking one investment prevents the taking of another
profitability index (PI)
the present value of an investment's future cash flows divided by its initial cost. also the benefit cost
ratio
dividend growth model
a model that determines the current price of a stock as its dividend next period divided by the discount
rate less the dividend growth rate
dividend yield
a stock's expected cash divided by its current price
, capital gains yield
the dividend growth rate, or the rate at which the value of an investment grows
common stock
equity without priority for dividends or in bankruptcy
cumulative voting
a procedure in which a shareholder may cast all votes for one member of the board of directors
straight voting
a procedure in which a shareholder may cast all votes for each member of the board of directors
proxy
a grant of authority by a shareholder allowing another individual to vote his or her shares
dividend
payments by a corporation to shareholders, made in either cash or stock
preferred stock
stock with dividend priority over common stock, normally with a fixed dividend rate, sometimes without
voting rights
primary market
the market in which new securities are originally sold to investors
secondary market
the market in which previously issued securities are traded among investors
dealer
an agent who buys and sells securities from inventory
broker
an agent who arranges security transactions among investors
member
as of 2006, a member is the owner of a trading license on the nyse
designated market makers (DMMs)
NYSE members who act as dealers in particular stocks. formerly known as specalists
floor brokers
NYSE members who execute customer buy and sell orders
net present value
the difference between an investment's market value and its costs
discount cash flow (DCF) valuation
calculating the present value of future cash flow to determine its value today
the process of valuing an investment by discounting its future cash flows
payback period
the amount of time required for an investment to generate cash flows sufficient to recover its initial cost
average accounting return (AAR)
an investment's average net income divided by its average book value
internal rate of return (IRR)
the discount rate that makes the net present value of an investment zero
net present value profile
a graphical representation of the relationship between an investment's net present value and various
discount rates
multiple rates of return
the possibility that more than one discount rate will make the net present value of an investment zero
mutually exclusive investment decisions
a situation where taking one investment prevents the taking of another
profitability index (PI)
the present value of an investment's future cash flows divided by its initial cost. also the benefit cost
ratio
dividend growth model
a model that determines the current price of a stock as its dividend next period divided by the discount
rate less the dividend growth rate
dividend yield
a stock's expected cash divided by its current price
, capital gains yield
the dividend growth rate, or the rate at which the value of an investment grows
common stock
equity without priority for dividends or in bankruptcy
cumulative voting
a procedure in which a shareholder may cast all votes for one member of the board of directors
straight voting
a procedure in which a shareholder may cast all votes for each member of the board of directors
proxy
a grant of authority by a shareholder allowing another individual to vote his or her shares
dividend
payments by a corporation to shareholders, made in either cash or stock
preferred stock
stock with dividend priority over common stock, normally with a fixed dividend rate, sometimes without
voting rights
primary market
the market in which new securities are originally sold to investors
secondary market
the market in which previously issued securities are traded among investors
dealer
an agent who buys and sells securities from inventory
broker
an agent who arranges security transactions among investors
member
as of 2006, a member is the owner of a trading license on the nyse
designated market makers (DMMs)
NYSE members who act as dealers in particular stocks. formerly known as specalists
floor brokers
NYSE members who execute customer buy and sell orders
