Question

1)Maria wishes to purchase a stock and has decided to conduct some fundamental analysis on the company. Which of the following will she most likely review during her analysis? I. cost structure II. cash flows III. management quality IV. earnings per share

	1.	II, III, and IV only
	2.	I and IV only
	3.	I and II only
	4.	I, II, III, and IV
	5.	I, II, and IV only

2)

Technical analysis is the:

	1.	study of historical prices as a means of predicting future prices.
	2.	analysis of economic conditions to determine future market movements.
	3.	analysis of a firm’s specific products and services to predict future growth.
	4.	review of a firm’s financial statements to predict future earnings potential.
	5.	study of investor’s emotional patterns to predict future market trends.

3) The price which is expected to be the minimal value for a security is called the:

	1.	base value.
	2.	resistance level.
	3.	support level.
	4.	reactive point.
	5.	par value.

4)

Precision Machining’s last annual dividend was $.80 a share. The firm will increase the dividend by 8 percent annually for the foreseeable future. What is this stock worth today if the required return is 10 percent?

	1.	$40.00
	2.	$14.52
	3.	$15.30
	4.	$15.06
	5.	$43.20

Answer 1

1: 4

All the areas must be analysed. This includes cost structure which will show how much debt the company has, Cash flows of the business, management quality which shows efficiency of the business and EPS which shows the profitability.

2: 3

Technical analysis refers to the analysis of the firms products and their technical viability.Other options are hence not relevant.

3: 2

Resistance level is the minimum price below which the stock will not fall.

4: 5

Price = D1/ (k-g)

= 0.8*108%/ (10%-8%)

=43.2