The constant growth model sometimes yields negative values for stocks, when growth rates exceed the discount rate. O True O False
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Q: The constant growth valuation model approach to calculating the cost of equity assumes that ____.…
A: The constant growth valuation model approach assumes that a company's dividends are going to…
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A:
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A: Efficient market is the market in which stock prices refelcts all the information available.
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Q: QUESTION 25 The constant growth valuation model approach to calculating the cost of equity assumes…
A: Constant Growth Valuation Model Approach assumes that a company's dividends are going to continue to…
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- Assume that the risk-free rate increases, but the market risk premium remains constant. What impact would this have on the cost of debt? What impact would it have on the cost of equity? Start a New ThreadIf we assume that inflation, the real cost of capital and the nominal cost of capital are always positive, which of the following statements is true? Question 3Select one: a. The expected inflation rate will always be greater than the nominal cost of capital. b. The nominal cost of capital will always be greater than the real cost of capital. c. The real cost of capital will always be greater than the nominal cost of capital. d. The expected inflation rate will always be greater than the real cost of capital.If the intrinsic value of a stock is below the current market price, over time we can expect buy orders to exceed sell orders, causing the price to rise buy and sell orders to be evenly matched, keeping the price at its current level sell orders to exceed buy orders, causing the price to rise sell orders to exceed buy orders, causing the price to fall buy orders to exceed sell orders, causing the price to fall
- Is the following sentence true or false? Please explain. The cost of new equity (re) could possibly be lower than the cost of reinvested earnings (rs) if the market risk premium, risk-free rate, and the company's beta all decline by a sufficiently large amount.1. What effect does increasing inflation expectations have on the required returns of investors in common stock? 2. Explain the specific relationship between risk and reward and why this relationship must be true.When estimating the cost of equity by use of the CAPM, three potential problems are (1) whether to use long-term or short-term rates for rRF, (2) whether or not the historical beta is the beta that investors use when evaluating the stock, and (3) how to measure the market risk premium, RPM. These problems leave us unsure of the true value of rs. a. true b. false
- A low P/B ratio implies that the market expects low future growth in earnings. True OR False PLEASE explainplease answer both. If a stock's fair return increases, what will happen to the stock's value? A. It will increase. B. It will not change. C. It will decrease. If the market risk premium rises, what will happen to the stock's price? A. It will not change. B. It will increase. C. It will decrease.18) Which of the following statements is false: A) The expectations hypothesis of the term structure of interest rates states that the long-term interest rate should be approximately equal to the sum of expected short-term interest rates over the contract horizon. B) The Gordon Growth Formula predicts that the price-dividend ratio fluctuates due to changes in interest rate and/or dividend growth rate. C) Fluctuations in the stock market depend only on investor expectations of future dividends. D) Bank runs can sometimes be prevented through deposit insurance. E) If the term structure of interest rates does not change, the price of zero-coupon bonds will increase over time.
- A stock that has a negative beta tends to a. move up when the market as a whole moves down. b. move down when the market as a whole moves down. c. be volatile compared to the market as a whole. d. be stable compared to the market as a whole.Based on the CAPM model, a stock with a negative beta has which of the following characteristics? A. An expected return less than zero. B. An expected return equal to the risk-free rate. C. Since these are so rare, the CAPM model does not account for negative beta stocks. D. An expected return less than the risk-free rate.Which of the following statements is most correct? Why?* a. If a market is weak-form efficient, this means that prices rapidly reflect all available public information. b. If a market is weak-form efficient, this means that you can expect to beat the market by using technical analysis that relies on the charting of past prices. c. If a market is strong-form efficient, this means that all stocks should have the same expected return. d. All of the statements above are correct. c. None of the statements above is correct.
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