BUSI 420 Read & Interact Chapter 6 Assignment Common Stock Valuation solutions complete answers

BUSI 420 Read & Interact Chapter 6 Assignment Common Stock Valuation solutions complete answers

 

Which of the following items would not be used to conduct fundamental analysis?

 

The dividend discount model values a share of stock as the sum of all _________ dividend payments.

 

True or false: The constant perpetual growth model requires that g > k.

 

True or false: The constant perpetual growth model can be usefully applied only to companies with a history of relatively stable earnings and dividends that are expected to continue to grow into the future.

 

There are two ways to calculate historical growth rates: using geometric average dividend growth rates or using _____ average dividend growth rates.

 

___________ analysis involves examining a firm's accounting statements and other financial and economic information to assess the value of a company's stock.

 

A firm's _____ rate is calculated by multiplying the ROE by one minus the payout ratio.

 

The        discount model values a share of stock as the sum of all expected future dividend payments, where the dividends are adjusted for risk and the time value of money.

 

The decomposition of ROE into three components is referred to as the        formula.

 

The ________ model assume the firm will pay dividends that grow at the rate g forever.

 

The _____ dividend growth model assumes that a firm will temporarily grow at a rate different from its long-term growth rate.

 

The constant perpetual growth model would be most appropriate for which of the following industries?

 

Assuming a stock has a supernormal growth period, followed by constant growth, the H-model assume a _____ decline in growth over the supernormal period.

 

The geometric average dividend growth rate is based on a geometric average of        dividends.

 

The model used to estimate discount rates is the ______.

 

The sustainable growth rate is equal to a firm's return on equity times its        ratio.

 

The residual income model is a method for valuing stock in a company that does not _____.

 

Which of the following is not one of the three components of the DuPont approach to calculating ROE?

 

Which of the following formulas is the correct estimate for free cash flow?

 

True or false: The two-stage dividend growth model would be appropriate for estimating the value of an established utilities company.

 

In the free cash flow model, the discount rate is based on the _________.

 

True or false: Assuming a stock has a supernormal growth period, followed by constant growth, the H-model assume a linear decline in growth over the supernormal period.

 

The inverse of the P/E ratio is the earnings       .

 

To calculate the discount rate, the CAPM formula uses the U.S. T-bill rate, the stock ____, and the stock market risk premium.

 

True or false: When earnings are bigger than cash flows, this many be a signal of high-quality earnings.

 

True or false: Residual income is also known as economic value added (EVA).

 

True or false: The price-sales ratio is calculated as the current dividend of a company's stock divided by its current annual sales revenue per share.

 

True or false: It a firm has negative earnings, it will also have negative free cash flow.

 

True or false: Similar to the DDM, the FCF model calculates the value of the equity directly.

 

The       -book ratio is sometimes called the market-book ratio.

 

A stock with a low P/E ratio would be classified as a ______ stock.

 

A firm whose earnings per share is not significantly larger than its cash flow per share is said to have ________ earnings.

 

Which of the following is an advantage of the enterprise value ratio over the P/E ratio?

 

The price-sales ratio focuses on a company's ability to generate _____.

 

The price-book ratio is the market value of a company's common stock divided by its _____ (or accounting) value of equity.

 

True or false: Enterprise value includes both debt and equity.