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
Related questions
Question
Transcribed Image Text: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
OD. 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
Transcribed Image Text:QUESTION 17
City plc plans to buy Utd plc. The current distributable earnings of Utd plc are £12m. City estimates that it will be able to grow
future earnings of Útd by'4% per annum. It is proposing to use an earnings yield of 11% in the valuation of Utd. Using the
Earnings Yield method, what value will City put on Utd?
O A. £178m
O B. £109m
OC. £200m
O D.£114m
O E. £222m
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education