Question 1

P/E ratios tend to be _______ when inflation is ______.

Accepted Answer

A)   higher; higher
B)   lower; lower
C)   higher; lower
D)   they are unrelatedE) A) and D)
F) A) and B)

Question 2

The value of internet companies is based primarily on _____.

Accepted Answer

A)   current profits
B)   Tobin's q
C)   growth opportunities
D)   replacement costE) All of the above
F) C) and D)

Question 3

Which one of the following is a common term for the market consensus value of the required return on a stock?

Accepted Answer

A)   Dividend payout ratio
B)   Intrinsic value
C)   Market capitalization rate
D)   Plowback ratioE) A) and B)
F) A) and C)

Question 4

A firm's earnings per share increased from $10 to $12,its dividends increased from $4.00 to $4.40,and its share price increased from $80 to $100.Given this information,it follows that _________.

Accepted Answer

A)   the stock experienced a drop in its P/E ratio
B)   the company had a decrease in its dividend payout ratio
C)   both earnings and share price increased by 20%
D)   the required rate of return increasedE) A) and D)
F) A) and C)

Question 5

Todd Mountain Development Corporation is expected to pay a dividend of $3.00 in the upcoming year.Dividends are expected to grow at the rate of 8% per year.The risk-free rate of return is 5% and the expected return on the market portfolio is 17%.The stock of Todd Mountain Development Corporation has a beta of 0.75.Using the constant growth DDM,the intrinsic value of the stock is _________.

Accepted Answer

A)   4.00
B)   17.65
C)   37.50
D)   50.00E) A) and D)
F) B) and C)

Question 6

ART has come out with a new and improved product. As a result, the firm projects an ROE of 25%, and it will maintain a plowback ratio of 0.20. Its earnings this year will be $3 per share. Investors expect a 12% rate of return on the stock.
-At what price would you expect ART to sell?

Accepted Answer

A)   $25.00
B)   $34.29
C)   $42.86
D)   $45.67E) C) and D)
F) B) and D)

Question 7

Rose Hill Trading Company is expected to have EPS in the upcoming year of $6.00.The expected ROE is 18.0%.An appropriate required return on the stock is 14%.If the firm has a plowback ratio of 70%,its intrinsic value should be _________.

Accepted Answer

A)   $20.93
B)   $69.77
C)   $128.57
D)   $150.00E) B) and C)
F) All of the above

Question 8

If a stock is correctly priced then you know that ____________.

Accepted Answer

A)   the dividend payout ratio is optimal
B)   the stock's required return is equal to the growth rate in earnings and dividends
C)   the sum of the stock's expected capital gain and dividend yield is equal to the stock's required rate of return
D)   the present value of growth opportunities is equal to the value of assets in placeE) None of the above
F) B) and C)

Exam 13: Equity Valuation

A firm's earnings per share increased from $10 to $12,its dividends increased from $4.00 to $4.40,and its share price increased from $80 to $100.Given this information,it follows that _________.

Correct Answer
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Rose Hill Trading Company is expected to have EPS in the upcoming year of $6.00.The expected ROE is 18.0%.An appropriate required return on the stock is 14%.If the firm has a plowback ratio of 70%,its intrinsic value should be _________.

Correct Answer
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Correct Answer
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P/E ratios tend to be _ when inflation is .

Correct Answer
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The value of internet companies is based primarily on _____.

Correct Answer
verified

Which one of the following is a common term for the market consensus value of the required return on a stock?

Correct Answer
verified

ART has come out with a new and improved product. As a result, the firm projects an ROE of 25%, and it will maintain a plowback ratio of 0.20. Its earnings this year will be $3 per share. Investors expect a 12% rate of return on the stock. -At what price would you expect ART to sell?

Correct Answer
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If a stock is correctly priced then you know that ____________.

Correct Answer
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Exam 13: Equity Valuation

A firm's earnings per share increased from $10 to $12,its dividends increased from $4.00 to $4.40,and its share price increased from $80 to $100.Given this information,it follows that _________.

Correct AnswerverifiedShow Answer

Rose Hill Trading Company is expected to have EPS in the upcoming year of $6.00.The expected ROE is 18.0%.An appropriate required return on the stock is 14%.If the firm has a plowback ratio of 70%,its intrinsic value should be _________.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

P/E ratios tend to be _______ when inflation is ______.

Correct AnswerverifiedShow Answer

The value of internet companies is based primarily on _____.

Correct AnswerverifiedShow Answer

Which one of the following is a common term for the market consensus value of the required return on a stock?

Correct AnswerverifiedShow Answer

ART has come out with a new and improved product. As a result, the firm projects an ROE of 25%, and it will maintain a plowback ratio of 0.20. Its earnings this year will be $3 per share. Investors expect a 12% rate of return on the stock. -At what price would you expect ART to sell?

Correct AnswerverifiedShow Answer

If a stock is correctly priced then you know that ____________.

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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P/E ratios tend to be _ when inflation is .

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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