Question 1

To justify a high P/E ratio, the market must believe one of the following about a firm:

Accepted Answer

A)  it has low growth opportunities.
B)  it will have constant dividends forever.
C)  it has high growth opportunities.
D)  it will use low depreciation to increase earnings.

Question 2

A stock offers an expected dividend of $3.50, has a required return of 14 percent, and has historically exhibited a growth rate of 6 percent.Its current price is $35.00 and shows no tendency to change.How can you explain this price based on the constant growth dividend discount model?

Accepted Answer

The constant growth dividend discount mo...

Question 3

Technical analysts would be more likely than other investors to index their portfolios.

Accepted Answer

A) True 
 B)False

Question 4

What is the value of the expected dividend per share for a stock that has a required return of 16 percent, a price of $45, and a constant growth rate of 12 percent?

Accepted Answer

A)  $1.80
B)  $3.60
C)  $4.50
D)  $7.20

Question 5

What is the most likely value of the PRESENT VALUE OF GROWTH OPPORTUNITIES for a stock with current price of $50, expected earnings of $6 per share, and a required return of 20 percent?

Accepted Answer

A)  $10
B)  $20
C)  $25
D)  $30

Question 6

Reinvesting earnings into a firm will not increase the stock price unless:

Accepted Answer

A)  the new paradigm of stock pricing is maintained.
B)  true depreciation is less than reported depreciation.
C)  the firm's dividends are growing also.
D)  the ROE of new investments exceeds the firm's required return.

Question 7

What should be the current price of a share of stock if a $5 dividend was just paid, the stock has a required return of 20 percent, and a constant dividend growth rate of 6 percent?

Accepted Answer

A)  $19.23
B)  $25.00
C)  $35.71
D)  $37.86

Question 8

Technical analysts are most likely to be successful in a market that is considered:

Accepted Answer

A)  semi-strong-form efficient.
B)  not to be strong-form efficient.
C)  not to be weak-form efficient.
D)  to follow a random walk.

Question 9

Which of the following is inconsistent with a firm that sells for very near book value?

Accepted Answer

A)  low current earning power
B)  no intangible assets
C)  high future earning power
D)  low, unstable dividend payment

Question 10

An excess of market value over the book value of equity can be attributed to going concern value.

Accepted Answer

A) True 
 B)False

Exam 7: Valuing Stocks

Technical analysts are most likely to be successful in a market that is considered:

Correct Answer
verified

Which of the following is inconsistent with a firm that sells for very near book value?

Correct Answer
verified

What is the most likely value of the PRESENT VALUE OF GROWTH OPPORTUNITIES for a stock with current price of $50, expected earnings of $6 per share, and a required return of 20 percent?

Correct Answer
verified

An excess of market value over the book value of equity can be attributed to going concern value.

Correct Answer
verified

Technical analysts would be more likely than other investors to index their portfolios.

Correct Answer
verified

Reinvesting earnings into a firm will not increase the stock price unless:

Correct Answer
verified

What should be the current price of a share of stock if a $5 dividend was just paid, the stock has a required return of 20 percent, and a constant dividend growth rate of 6 percent?

Correct Answer
verified

To justify a high P/E ratio, the market must believe one of the following about a firm:

Correct Answer
verified

A stock offers an expected dividend of $3.50, has a required return of 14 percent, and has historically exhibited a growth rate of 6 percent.Its current price is $35.00 and shows no tendency to change.How can you explain this price based on the constant growth dividend discount model?

Correct Answer
verified
The constant growth dividend discount mo...
View Answer

What is the value of the expected dividend per share for a stock that has a required return of 16 percent, a price of $45, and a constant growth rate of 12 percent?

Correct Answer
verified

Exam 7: Valuing Stocks

Technical analysts are most likely to be successful in a market that is considered:

Correct AnswerverifiedShow Answer

Which of the following is inconsistent with a firm that sells for very near book value?

Correct AnswerverifiedShow Answer

What is the most likely value of the PRESENT VALUE OF GROWTH OPPORTUNITIES for a stock with current price of $50, expected earnings of $6 per share, and a required return of 20 percent?

Correct AnswerverifiedShow Answer

An excess of market value over the book value of equity can be attributed to going concern value.

Correct AnswerverifiedShow Answer

Technical analysts would be more likely than other investors to index their portfolios.

Correct AnswerverifiedShow Answer

Reinvesting earnings into a firm will not increase the stock price unless:

Correct AnswerverifiedShow Answer

What should be the current price of a share of stock if a $5 dividend was just paid, the stock has a required return of 20 percent, and a constant dividend growth rate of 6 percent?

Correct AnswerverifiedShow Answer

To justify a high P/E ratio, the market must believe one of the following about a firm:

Correct AnswerverifiedShow Answer

A stock offers an expected dividend of $3.50, has a required return of 14 percent, and has historically exhibited a growth rate of 6 percent.Its current price is $35.00 and shows no tendency to change.How can you explain this price based on the constant growth dividend discount model?

Correct AnswerverifiedThe constant growth dividend discount mo...View AnswerShow Answer

What is the value of the expected dividend per share for a stock that has a required return of 16 percent, a price of $45, and a constant growth rate of 12 percent?

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The constant growth dividend discount mo...
View Answer

Correct Answer
verified