The Gordon growth model (only one possible answer) uses earnings, but not the dividends for calculating year-to-year growth variable. relies on the equity discount rate, which equals roughly 10% across market phases. assumes constant growth of dividends from year to year, this being its main weakness. includes time-varying assumption on dividend growth and terminal value. involves the analysis of cash flows, EBIT, and further accounting terms. 1b. Free cash flow to the company can be calculated using balance sheet items: (only one possible answer) includes the net working capital, which is equal to WACC minus depreciation. is derived from P/E valuation with adjustment for CAPEX and dividend payo
The Gordon growth model (only one possible answer) uses earnings, but not the dividends for calculating year-to-year growth variable. relies on the equity discount rate, which equals roughly 10% across market phases. assumes constant growth of dividends from year to year, this being its main weakness. includes time-varying assumption on dividend growth and terminal value. involves the analysis of cash flows, EBIT, and further accounting terms. 1b. Free cash flow to the company can be calculated using balance sheet items: (only one possible answer) includes the net working capital, which is equal to WACC minus depreciation. is derived from P/E valuation with adjustment for CAPEX and dividend payo
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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100%
1a. The
(only one possible answer)
- uses earnings, but not the dividends for calculating year-to-year growth variable.
- relies on the equity discount rate, which equals roughly 10% across market phases.
- assumes constant growth of dividends from year to year, this being its main weakness.
- includes time-varying assumption on dividend growth and terminal value.
- involves the analysis of cash flows, EBIT, and further accounting terms.
1b.
(only one possible answer)
includes the net working capital, which is equal to WACC minus
is derived from P/E valuation with adjustment for CAPEX and dividend payout ratio.
similar to the P/E ratio, does not involve discounting or complex calculation.
takes into account EBIT, depreciation, working capital, and CAPEX.
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