The valuation of common stock is considerably more complicated than the valuation of bonds or preferred stocks because:
A)The returns can take two forms, i.e.annual cash payments and price appreciation
B)Common stock dividends are normally expected to grow and not remain constant
C)The returns from common stocks are generally larger and more certain than the returns from bonds and preferred stocks
D)The returns can be in annual cash payments or price appreciation, and they are normally expected to grow and not remain constant

Question

Quizplus · Accepted Answer

The valuation of common stock is considerably more complicated than the valuation of bonds or preferred stocks because the returns can be in annual cash payments or price appreciation, and they are normally expected to grow and not remain constant. This makes it difficult to determine the future cash flows and apply a discount rate to them. Additionally, there may be other factors that affect the value of the stock, such as market trends, management decisions, and industry changes.

The Valuation of Common Stock Is Considerably More Complicated Than