Answer in your own words the following questions.
Why does the value of a share of stock depend on dividends?
A substantial percentage of the companies listed on the NYSE and the NASDAQ don't pay dividends, but investors are nonetheless willing the buy shares in them. How is this possible?
Under what circumstances might a company choose not to pay dividends?
Suppose a company has a preferred stock issue and a common stock issue. Both have just paid a $2 dividend. Which do you think will have a higher price, a share of the preferred or a share of the common?
Evaluate the following statement: Managers should not focus on the current stock value because doing so will lead to an overemphasis on short-term profits at the expense of long-term profits.
What are the difficulties of using the PE ratio to value stock?
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