--%>

Explain company creates value for its shareholders in a year

Is this true that a company creates value for its shareholders in a year when this distributes dividends or when the quotation of the shares increases?

E

Expert

Verified

No. A company creates value to shareholders if the return they find is higher than required return. To create value, it is essential that the return on dividends plus the return because of price increases be superior to the required return; this is not enough if this is a positive number.

   Related Questions in Corporate Finance

  • Q : Estimate stock's current price A

    A company currently pays a dividend of $3.75 per share, D0 = 3.75. It is estimated that the company's dividend will grow at a rate of 15% percent per year for the next 2 years, then the dividend will grow at a constant rate of 7% the

  • Q : Explain merits and demerits of standard

    Explain merits and demerits of standard market practice to find the volatility as a function of underlying.

  • Q : Attributes of debt securities What are

    What are the Attributes of debt securities?

  • Q : PV of Dividends PV of dividends:

    PV of dividends: Cortez, Inc., is expecting to pay out a dividend of $2.50 next year. After that it expects its dividend to grow at 7 percent for the next four years. What is the present value of dividends over the next five-year period if the required rate of return is 10 percent?

  • Q : Who wrote famous paper- distribution of

    Who wrote famous paper of on distribution of cotton price returns?

  • Q : Did you see Vueling case Did you notice

    Did you notice the Vueling case? How is this possible that an investment bank sets the objective price of its shares in €2.50 per share upon the 2nd of October, 2007, just after replacing Vueling shares at €31 per share in J

  • Q : Relation between book value of shares

    Is the relation in between book value of shares or capitalization a good guide to investments?

  • Q : Is Capital Cash Flow identical with

    Is Capital Cash Flow identical with Free Cash Flow?

  • Q : Calculating Beta when market

    A company with a market capitalization of $100 million has no debt and a beta of 0.8. What will its beta be after it borrows $50 million (giving that there are no other changes and no taxes)?

  • Q : Which method must use to valuate young

    Which method must we use to valuate young companies along with high growth but uncertain futures? Two illustrations were Boston Chicken and Telepizza while they began.