Describe the rights and advantages belonging to shareholders
Numerous rights are belonging to shareholders in any company. In this paper, I will discuss some of the rights and benefits of shareholders. First, shareholders have the power to vote on critical issues affecting the firm such as electing directors, asset liquidation, and mergers. Secondly, shareholders own a portion of the company and therefore can sell or transfer their shares to someone else. Thirdly, shareholders are entitled to dividends. Therefore, based on the profits the company makes, a shareholder may get dividends on their stock. Lastly, shareholders have the right to inspect the company’s books and have the right to sue the firm in case they found wrongdoing (Investopedia, 2018).
Explain the differences between the Standard and Poor's 500 Index and the Dow Jones Industrial Average. Which is a better measure of stock market performance? Why?
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The fundamental difference between the Standard and Poor’s 500 (S&P 500) and the Dow Jones Industrial Average (DJIA) lies in their diversity as well as weighting methodology (Investopedia Staff, 2018). The DJIA is determined using a “price-weighted average of 30 stocks meaning that a divisor divides the total of the component stock whereas S&P 500 is determined from “market value-weighted index of 500 stocks”. The S$P 500 is a better measure of stock market performance. This is because it signifies a more substantial majority of the stocks within the market. Additionally, it computed using a market value as opposed to price value weight (Investopedia Staff, 2018).
Describe the differences between common stock and preferred stock.
The most common type of stock issued by the firm is the common stock. Common stock entitles shareholders to share, through dividends, the profits of the company. Usually, the stockholders have entitled voting rights, and the number of votes is directly related to the percentage of shares owned. Owners of common stock can maintain their share in the company because they have “preemptive rights.” On the other hand, preferred stock is usually regarded as less volatile when compared to common stock. They don’t have voting rights. However, they have a greater claim to the assets of the company. Preferred stocks are “callable,” meaning that the firm can repurchase the share from the shareholder. However, the buying back of the shares is usually at a price that is favorable. Compared to common stocks, preferred stocks receive their shares first. In preferred stock, the shareholders are typically given regular dividend payments, which are fixed, for some time which ought to be specified by the company specified (Horton, 2018). 4. Imagine that on June 4, the Dow Jones Industrial Average closed at 13,598.14, which was up 148.86 points from the previous day's close of 13,449.28. Calculate the return, in percent to four decimal places, of the stock market for June 4.
The cost per stock at a brokerage firm is $0.10. Calculate how much money you would need to buy 150 shares of HiTech, Inc., which trades at $18.22.
HiTech, Inc.'s growth for the future is forecasted to be a constant 10 percent. HiTech's next dividend is expected to be $1.18. Calculate the value of HiTech stock when the required return is 12 percent.
The formula for the value of stock is given by;
Preferred stock from HiTech, Inc. pays $1.20 in annual dividend. Calculate the value of the stock if the required return on the preferred stock is 4.5 percent.
HiTech, Inc. has earnings per share of $1.82 and a P/E ratio of 31.54. Calculate the stock price.
References
Hellwig, B. (2018). Know your Shareholder Rights. [Online]. Available at: https://www.investopedia.com/investing/know-your-shareholder-rights/ . Accessed 20 th Dec 2018.
Horton, M. (2018). What is the Difference between Preferred Stock and Common Stock? [Online]. Available at: https://www.investopedia.com/ask/answers/difference-between-preferred-stock-and-common-stock/ . Accessed 20 th Dec 2018.
Investopedia Staff. (2018). What’s the Difference between the Dow Jones Industrial Average and the S&P 500? [Online]. Available at: https://www.investopedia.com/ask/answers/difference-between-dow-jones-industrial-average-and-sp-500/ . Accessed 20 th Dec 2018.
