B) grow at the same speed as the average company
C) grow gradually
D) not flourish
E) namong the above
The _______ is defined as the current worth of all cash proceeds to the investor in thestock.A) dividend payout ratio
B) intrinsic value
C) industry capitalization price
D) plowback proportion
E) none of the above
Historically, P/E ratios have actually tfinished to be _________.
You are watching: P/e ratios tend to be _______ when inflation is ______.
A) higher once inflation has actually been high
B) lower when inflation has been high
C) unassociated through inflation rates but correlated via other macrofinancial variables
D) uncorrelated with any kind of macroeconomic variables including inflation rates
The ______ is a widespread term for the market agreement worth of the forced rerotate ona stock.
A) dividend payout ratio
B) intrinsic worth
C) market capitalization rate
D) plowback rate
E) none of the above
You wish to earn a rerotate of 13% on each of 2 stocks, X and also Y. Stock X is expected to pay a dividend of $3 in the upcoming year while Stock Y is intended to pay a dividend of $4 in the upcoming year. The intended growth rate of dividends for both stocks is 7%. The intrinsic worth of stock X ______.
A)cannot be calculated without discovering the sector rate of rerotate
B) will certainly be better than the intrinsic worth of stockY
C) will certainly be the very same as the intrinsic value of stock Y
D) will certainly be much less than the intrinsic value of stock Y
D.PV0 = D1/(k-g); offered k and g are equal, the stock through the larger dividfinish will certainly have actually the greater value.
You wish to earn a rerevolve of 12% on each of 2 stocks, A and also B. Each of the stocks is expected to pay a dividfinish of $2 in the upcoming year. The supposed development rate of dividends is 9% for stock A and 10% for stock B. The intrinsic value of stock A _____.
A)will be higher than the intrinsic worth of stock B
B) will be the exact same as the intrinsic worth of stock B
C) will certainly be less than the intrinsic worth of stock B
D) cannot be calculated without learning the rate of rerotate on the market portfolio.
C.PV0 = D1/(k-g); provided that dividends are equal, the stock via the greater development price will have actually the greater value.
Each of two stocks, A and B, are meant to pay a dividfinish of $5 in the upcoming year. The expected expansion rate of dividends is 10% for both stocks. You require a price of rerotate of 11% on stock A and a return of 20% on stock B. The intrinsic worth of stock A
A)will be greater than the intrinsic worth of stock B
B) will be the same as the intrinsic value of stock B
C) will be much less than the intrinsic value of stock B
D) cannot be calculated without knowing the industry price of rerotate.
A.PV0 = D1/(k-g); offered that dividends are equal, the stock through the bigger forced rerotate will certainly have the reduced worth.
If the intended ROE on reinvested revenue is equal to k, the multistage DDM reduces to
A) V0= (Expected Dividfinish Per Share in Year 1)/k
B) V0= (Expected EPS in Year 1)/k
C) V0= (Treasury Bond Yield in Year 1)/k
D) V0= (Market return in Year 1)/k
B.If ROE = k, no expansion is occurring; b = 0; EPS = DPS
Music Doctors Company kind of has an intended ROE of 14%. The dividfinish development price will be ________ if the firm adheres to a plan of paying 60% of income in the develop of dividends.
E) namong the above
B.14% X 0.40 = 5.6%
Bubba Gumm Company kind of has actually an intended ROE of 9%. The dividfinish growth rate will certainly be _______ if the firm follows a policy of plowing back 10% of revenue.
9% X 0.10 = 0.9%.
A wanted stock will certainly pay a dividend of $2.75 in the upcoming year, and also annually after that, i.e., dividends are not intended to flourish. You require a rerevolve of 10% on this stock. Use the continuous expansion DDM to calculate the intrinsic value of this wanted stock.
B.2.75 / .10 = 27.50
You are considering obtaining a prevalent stock that you would certainly favor to host for one year. You mean to receive both $1.25 in dividends and also $32 from the sale of the stock at the end of the year. The maximum price you would certainly pay for the stock today is _____ if you wanted to earn a 10% rerevolve.
$30.2310 = (32 - P + 1.25) / P; .10P = 32 - P + 1.25; 1.10P = 33.25; P = 30.23.
Sure Tool Company kind of is supposed to pay a dividend of $2 in the upcoming year. The risk-cost-free price of rerevolve is 4% and the intended return on the sector portfolio is 14%. Analysts suppose the price of Sure Tool Company type of shares to be $22 a year from currently. The beta of Sure Tool Company"s stock is 1.25.
The market"s required price of rerotate on Sure"s stock is _____.
C.4% + 1.25(14% - 4%) = 16.5%.
Sure Device Company type of is expected to pay a dividend of $2 in the upcoming year. The risk-free price of return is 4% and also the meant return on the industry portfolio is 14%. Analysts intend the price of Sure Tool Company type of shares to be $22 a year from currently. The beta of Sure Device Company"s stock is 1.25.
If Sure"s intrinsic worth is $21.00 today, what must be its growth rate?
E.k = .04 + 1.25 (.14 - .04); k = .165; .165 = 2/21 + g; g = .07
Torque Corporation is intended to pay a dividend of $1.00 in the upcoming year. Dividends are
supposed to prosper at the price of 6% per year. The risk-cost-free rate of rerevolve is 5% and the expectedreturn on the industry portfolio is 13%. The stock of Torque Corporation has actually a beta of 1.2.
What is the intrinsic value of Torque"s stock?
D.k = 5% + 1.2(13% - 5%) = 14.6%; P = 1 / (.146 - .06) = $11.62.
High Tech Chip Company is intended to have actually EPS in the coming year of $2.50. The expected ROE is 12.5%. An correct forced return on the stock is 11%. If the firm has actually a plowback ratio of 70%, the expansion rate of dividends must be
E.12.5% X 0.7 = 8.75%.
The goal of fundamental analysts is to uncover securities
A) whose intrinsic worth exceeds industry price.
B) through a positive existing value of growth methods.
C) through high sector capitalization rates.
D) all of the over.
E) namong the over.
Investors want high plowback ratios
A) for all firms.
B) whenever before ROE > k.
C) whenever before k > ROE.
D) only once they are in low tax brackets.
E) whenever financial institution interemainder rates are high.
Since the DDM requires multiple estimates, investors should
A) closely study inputs to the version.
B) perform sensitivity analysis on price estimates.
C) not use this version without skilled assistance.
D) feel confident that DDM estimates are correct.
E) both A and B.
For most firms, P/E ratios and also threat
A) will certainly be directly connected.
B) will certainly have an inverse relationship.
C) will certainly be unassociated.
D) will both boost as inflation increases.
E) A and D
Suppose that the average P/E multiple in the gas industry is 17. KMP is intended to have actually an EPS of $5.50 in the coming year. The intrinsic worth of KMP stock must be _____.
B.17 X $5.50 = $93.50.
Risk Metrics Company is expected to pay a dividend of $3.50 in the coming year. Dividends
are intended to flourish at a price of 10% per year. The risk-totally free rate of return is 5% and also the expected rerevolve on the sector portfolio is 13%. The stock is trading in the market now at a price of $90.00.
What is the market capitalization price for Risk Metrics?
B.k = 3.50/90 + .10; k = 13.9%
The industry capitalization rate on the stock of Flexsteel Company is 12%. The meant ROE is 13% and also the intended EPS are $3.60. If the firm"s plowback proportion is 75%, the P/E ratio will certainly be ________.
E) none of the above
D.g = 13% X 0.75 = 9.75%; .25/(.12-.0975) = 11.11
A company whose stock is offering at a P/E ratio higher than the P/E proportion of a sector index many likely has actually _________.
A) an anticipated income growth rate which is less than that of the average firm
B) a dividfinish yield which is much less than that of the average firm
C) much less predictable revenue growth than that of the average firm
D) higher cyclicality of income growth than that of the average firm
E) namong the above.
In the dividfinish discount model, _______ which of the adhering to are not integrated right into the discount rate?
A)genuine risk-complimentary price
B) danger premium for stocks
C) return on assets
D) expected inflation rate
E) namong the above.
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