QUESTION 18 Identify the incorrect statement concerning valuation methods. O A. Net asset valuations are the best way of deciding a bid price O B. A major difficulty with the price/earnings ratio method is determining the earnings to which the price/earnings ratio is applied OC. The discounted cash flow method looks at the incremental cash flows arising from a proposed acquisition O D. The market capitalisation of a company reflects marginal trading in its shares O E. The dividend growth model offers a deprival value for target shareholders

QUESTION 18 Identify the incorrect statement concerning valuation methods. O A. Net asset valuations are the best way of deciding a bid price O B. A major difficulty with the price/earnings ratio method is determining the earnings to which the price/earnings ratio is applied OC. The discounted cash flow method looks at the incremental cash flows arising from a proposed acquisition O D. The market capitalisation of a company reflects marginal trading in its shares O E. The dividend growth model offers a deprival value for target shareholders

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Which of the following is not true about the determination of components used to determine the weighted average cost of capital? Either Capital Asset Pricing model approach or Discounted Cash Flow model are acceptable method of determining the cost of retained earning Tax rates are excluded in getting the cost of retained earnings and cost of issuance of new equity The value of a preferred share can be computed by multiplying the cost of preferred share with the uniform preferred dividends Discounted cash flow approach can be applied if data related to market return, nominal risk-free rate, and beta are not available
Question 4 What are the attributes of quality assumptions in financial modelling? Question 5 Identify and explain two Advantages and two Disadvantages of using the Comparable Companies Analysis valuation method. Question 6 Identify two Advantages and two Disadvantages of using the Discounted Cash Flows valuation method.
18- What sources of long-term capital do firms use? A. Long-term debt B. Preferred stock C. Common stock D. All of the above 19- The component cost of common equity raised by retaining carnings is: A. ko В. К. C. ke D. ks 20- Increasing the value of the combined firms more than the sum of the individual firms taken separately is known as: A. Risk management B. Maintaining control C. Synergy D. Diversification
QUESTION 8 Which of the following statements is true? O A. The DuPont Identity is used to calculate Return on Assets. B. A company can imporve their P/E ratio by improving their EPS. O C. A Market to Book ratio greater than 1 always means the stock is undervalued. D. All of the statements are false.
Why are unrealized gains and losses from available-for-sale securities not reported as a component of net income? Select one: a. Because goodwill exists that must be separately accounted for b. Because the investor has the ability to exercise significant influence over the investee c. Because consolidated financial statements must be prepared d. Because large swings in market value over which management has no control may distort current period performance as measured by net income
QUESTION 9 If markets are semi-strong efficient, which of the following situations is most likely to yield abnormal returns? O 1. Following the advice of your stockbroker's newsletter O 2. Identifying a pattern in a company's historical stock price O 3. Obtaining insider information Analysing a company's earning report
Solve both with Explanation
Financial Leverage: a.can impact profitability. b.increases when stock is issued. c.is a sign of financial weakness. d.All of the above. e.None of the above.
"Address the limitations of traditional methods such as CAPM (Capital Asset Pricing Model) andDiscounted Cash Flow Analysis in valuing a company's stock price in non - stationary marketconditions. Particularly, discuss the consistency of the beta coefficient in determining the cost ofcapital and the selection of the risk - free rate. Also, evaluate how these traditional models can orcannot integrate non-financial factors (e. g., company management, brand value, industry trends).Lastly, discuss the alternative models used in stock valuation and the advantages and disadvantagesof these models compared to traditional methods."
Q.What is the advantage of an ETF relative to open-end and closed-end investment company? ____ A) Intraday pricing of its shares B) Tax shelter protection C) Lower portfolio turnovers D) All of the above
CHOICES A. Only Statement I is correctB. Only Statement II is falseC. Statements II and III are falseD. Only Statement III is falseE. All statements are correct
LBO Valuation - Normalizing EBITDA The ultimate valuation of a prospective LBO is usually based on normalized EBITDA so it's important to understand potential adjustments to derive normalized EBITDA. Which of the following is not typically considered an adjustment when normalizing EBITDA? Gains/losses on sale of assets A O Personal expenses being expensed to the company Reducing cost of goods sold as the private equity firm will drive costs lower Transaction or professional fees Scroll down for more Next

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