You are discussing stock valuation techniques with your broker. You me

QUESTION

You are discussing stock valuation techniques with your broker. You mention that yourFinance professor stated that a stock that will never pay a dividend is valueless. Yourbroker says this is not true because you can always sell the stock to someone else (thus, a capital gain is
We cant argue with “a” .
before that we need to know “PRICE EARNING RATIO” = MPS /EPS
if any investor invest amount in stock he will verify companys finacial statements ,inthat
devidend pay out rartio ,price earning ratio,debt equiry ratio and so..
sincne dividend pay out is important to consider ,but we have to look at price earning ratio also..
it means how many times it is share price appriciated
Because not only the dividend pay out is the considiration to take the stock in the company.
if it is bond the fixed coupon we will get on its intervel periods that is 3,6 monts, or 1 year ,
and reataire at at mtured time par valuepar value.
but in case of a stock the company may pay cash dividend or may not.it can be traded.
some times company may wants to appriciate their MPS value ,if they not pay the cash diividend then
the rest amount directly transefer

to “retained earnings” ,and through this “share holders part in the balance would be increased at this point the “Market price of shere “get appriciated.
If investor wants to sells his stock at this movement he could get capital gain on his investement.
since it was not paid dividend ,the investor can get same amount of “Gain”. we cant argue with “b”also
whenever company issue any “right shares” then the rights will be used to get additional shares .
since we have rights to vote ,we cant control managirial decisions.unless, we have high quantity of stock we cant control.

ANSWER:

CLICK REQUEST FOR  AN EXPERT SOLUTION