CHAPTER 6STOCK VALUATIONAnswers to Concepts Review and Critical Thinking Questions1.The value of any investment depends on its cash flows; i.e., what investors will actually receive. The cash flows from a share of stock are the dividends.2.Investors believe the company will eventually start paying dividends (or be sold to another company).3.In general, companies that need the cash will often forgo dividends since dividends are a cash expense. Young, growing companies with
