The Equity of the Corporation: Common and Preferred Stock

John B. Guerard and Eli Schwartz
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John B. Guerard: McKinley Capital Management, Inc.
Eli Schwartz: Lehigh University

Chapter Chapter 8 in Quantitative Corporate Finance, 2007, pp 157-185 from Springer

Abstract: Abstract This chapter deals mainly with the financial function of the shareholder, i.e., the supplying of risk capital and the expected rewards thereof. The shareholders’ expected return is the supply cost of equity capital. Only if the firm is able to give its shareholders at the minimum the “normal” rate of return on risk capital, can the company be considered an economic success. Thus, a large part of the discussion is centered on the behavior of the investment markets. This follows from the assumption that the major objective of financial management is to maximize the long-run value of the common stock.

Date: 2007
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DOI: 10.1007/978-0-387-34465-2_8

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