A. 1. Right to share income and assets 2. Control of the firm 3. Preemptive right
4. Voting Right
B. Free cash flow (FCF) represents the cash that a company is able to generate after laying out the money required to maintain or expand its asset base. Free cash flow is important because it allows a company to pursue opportunities that enhance shareholder value. Without cash, it's tough to develop new products, make acquisitions, pay dividends and reduce debt. All else equal, the WACC of a firm increases as the beta and rate of return on equity increases, as an increase in WACC notes a decrease in valuation and a higher risk. The cash flow valuation model is Free Cash Flow = Net Income + Depreciation + Deferred Taxes – Dividends Paid- Capital Expenditures
C.
D.
E. 1.
F. 1.
O. rs = = 7% + (12% - 7%)(1.2) = 7% + (5%)(1.2) = 7% + 6% = 13%
P. D1=2*1.06=2.12 D2=2.2472 D3=2.3820
2. D1/rs-g=2.2472/0.13-0.06=$32.1
3. Dividend Yield =Dn/pn-1=7% R =13% Expected capital gains yield = r- Dn/pn-1=6%
Q. 2.12/30.29+0.06 = 13%
R. P0=46.66 Expected dividend yield= 2.6/46.66 = 5.6% Capital gains yield= 7.4% Year 3 to Year 4 
 P3= 56.5964 Expected dividend yield = 7.0% Capital gains yield= 6.0%
S. Free cash flow is a way of looking at a business's cash flow to see what is available for distribution. This may be useful to equity holders, debt holders, and preferred stock holders to see how much cash can be extracted from a company without causing issues to its day to day operations. The dividend growth model deals with dividends and the company’s growth. The dividend growth model usually assumes a constant growth rate while the FCF varies on the company’s cash.
T. Market multiples analysis is a financial modeling method of assigning a value to assets or to a business. For example, company’s use the P/E multiplier to see expected earnings and