Question

1)what are the correct statements.

Group of answer choice:

a)If a security is underpriced, then the expected holding period return is above the market capitalization rate.

b)The value of the equity equals the present value of all future payouts (dividends plus repurchases).

c)The value of a share equals the present value of all future dividends per share.

d)If a firm reinvests its earnings at an ROE equal to the market capitalization rate, then its earnings-price (E/P) ratio is equal to the market capitalization rate.

e)The value of a share equals the present value of earnings per share assuming the firm does not grow, plus the NPV of all future investments.

2)what are the the correct statements.

Group of answer choices:

a)Everything else equal, the higher the expected dividend growth rate, the higher the P/E ratio.

b)Everything else equal, the higher the plowback ratio, the lower the P/E ratio.

c)Everything else equal, the higher the plowback ratio, the higher the P/E ratio.

d)Everything else equal, the higher the risk of the stock, the lower the P/E ratio.

e)Everything else equal, the higher the risk of the stock, the higher the P/E ratio.

3)Match the stock valuation model with the cash flows used in that model from the choices.

Group of answer choices

-Total Payout Model

Group of answer choices: Dividends per share Free Cash Flow to the Firm Dividends plus buybacks

-Dividend Discount Model

Group of answer choices: Dividends per share Free Cash Flow to the Firm Dividends plus buybacks

-DCF Model

Group of answer choices: Dividends per share Free Cash Flow to the Firm Dividends plus buybacks

4)

Match the stock valuation mode with the discount rate used in that model from the options.

-Total Payout Model

Group of answer choices: equity cost of capital weighted-average cost of capital

-Dividend Discount Model

Group of answer choices: equity cost of capital weighted-average cost of capital

-DCF Model

Group of answer choices: equity cost of capital weighted-average cost of capital

Answer #1

1)

a)If a security is underpriced, then the expected holding period return is above the market capitalization rate.

c)The value of a share equals the present value of all future dividends per share.

e)The value of a share equals the present value of earnings per share assuming the firm does not grow, plus the NPV of all future investments.

2)

a)Everything else equal, the higher the expected dividend growth rate, the higher the P/E ratio.

b)Everything else equal, the higher the plowback ratio, the lower the P/E ratio.

d)Everything else equal, the higher the risk of the stock, the lower the P/E ratio.

3)

Total payout - dividend + others

Dividend discount - Dividend per share

DCF - Free cash flow to the firm

4)

Total payout - equity cost of capital

DDM Model - equity cost of capital

DCF - Weighted average cost of capital

Check the correct statement
f a firm reinvests its earnings at an ROE equal to the market
capitalization rate, then its earnings-price (E/P) ratio is equal
to the market capitalization rate.
The value of a share equals the present value of all future
dividends per share.
If a security is underpriced, then the expected holding period
return is above the market capitalization rate.
The value of a share equals the present value of earnings per
share assuming the firm does...

which of the following is correct ?
Group of answer choices
The market value of the debentures is not affecting the
calculation of the WACC
Tax-adjustment is required to calculate the cost of ordinary and
preference share capital
The cost of equity under the dividend growth model and the CAPM
may or may not be equal in practice
The cost of equity is always higher than the WACC of the
company

Which of the following statements is correct? Group of answer
choices I
f a company's tax rate increases, then, all else equal, its
weighted average cost of capital will decline.
WACC calculations should be based on the before-tax costs of all
the individual capital components.
A change in a company's target capital structure cannot affect
its WACC. An increase in the risk-free rate will normally lower the
marginal costs of both debt and equity financing.
Flotation costs associated with issuing...

M&M Proposition I with no taxes implies that the:
Multiple Choice:
a. weighted average cost of capital decreases as the debt-equity
ratio increases.
b. cost of equity increases as the debt-equity ratio
decreases.
c. value of an unlevered company equals the value of a levered
company plus the value of the interest tax shield.
d. cost of capital is the same regardless of the debt-equity
ratio used
e. value of a company is inversely related to the amount of
leverage...

Which of the following statements is
not correct?
Group of answer choices
The binomial option pricing model when taken to the limit
becomes the Black-Scholes option pricing model.
The Black-Scholes model uses a continuous time discount
factor.
The binomial option pricing model use a ratio of the range
values as the hedge ratio.
The Black-Scholes model is related to a heat transfer equation
and Brownian molecular motion.
The Black Scholes model only estimates the intrinsic value of
the call option....

1. Among the following statements, only 3 are
correct with respect to corporate valuations. Identify which
ones.
a) There are several potential
values for a single company
b) Valuation combines business and
financial analysis, as well as the use of valuation
methodologies
c) The value of a company with
stable earnings does not change over time
d) Valuation is only based on
future earnings projections, one does not take into account current
or historical performance at all
2. Which of...

These statements are true of false? Explain.
1) In DCF valuation, a company can increase its return on equity
(ROE) by increasing
its leverage ratio if and only if its return on capital (ROC)
exceeds its after-tax cost of
debt (rd x (1 - Tc)). (Assume all other inputs are fixed.)
2) In the context of the dividend discount model (DDM), a
company can always increase
its intrinsic equity value by increasing its dividend payout ratio
if and only if...

HOMEWORK 5 Due July 22 2020 1. Suppose PQR Corp. just paid a
dividend of $0.75. The firm has a payout ratio of 25%, and its
dividends are expected to grow in perpetuity at 15%. You estimate
that its market capitalization rate is 16%.
(a) At what price should the stock of PQR sell if it is priced
by the constant dividend growth model?
(b) Decompose the price into PVGO and the present value of
Assets-in-Place
(c) What is the...

#1. A firm should use as much non-financial liability financing
as it can if
A) a firm should try to limit the amount of non-financial
liability financing it uses
B) there is an operational linkage involved
C) arbitrageurs can easily and quickly undo choices that are
suboptimal
D)its risk-adjusted cost of capital is below that of other
sources of financing
#2. A bondʹs promised rate of return will be
A) greater than or equal to the firmʹs overall weighted average...

HELLO, PLEASE SELECT THE CORRECT ANSWER:
1. If a firm wants to maintain its present ratio of debt
to equity, its present dividend payout ratio, and does not want to
sell any new equity, the firm's growth rate in sales and assets
must be less than or equal to its:
A. dividend payout ratio.
B. retention ratio.
C. sustainable growth rate.
D. growth rate with no external financing.
E. projected sales growth rate.
2. All else the same, the level...

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