SERIES 66 ASKS QUESTIONS ABOUT METHODS FOR DETERMINING THE VALUE OF EQUITY SECURITIES
Taking the Series 66 exam soon? Make sure that you are familiar with the four common ways of valuing equity securities. NASAA's Series 66 Test Specifications lists these methods in Section II (B) (1-4), so you can reasonably expect to see questions on these methods on the actual Series 66 exam. Bob Eder covers Valuing Equity Securities in his Study for the Series 66 Exam . Here is a sample of Bob Eder's treatment: Discounted Cash Flow (DCF) II (B) (4) Discounted Cash Flow considers all expected dividends that the company will pay over a certain number of years, and reduces them to present value dollars. The method uses a discount percentage that is equivalent to the cost of capital for the company paying the dividend, or the cost of borrowing monies from a bank. The sum of all discounted dividends equals the price of common stock. Discounting involves dividing a number by 1 plus the discount r