which of the following statements is false? O When a buyer values a target firm, the appropriate discount rate is the target's weighted-average cost of capital O Market value of a business measures the worth of that business to minority owners O Going-concern value of a firm is equal to the present value of expected net income O On average, acquisitions create value for shareholders of the target firm

which of the following statements is false? O When a buyer values a target firm, the appropriate discount rate is the target's weighted-average cost of capital O Market value of a business measures the worth of that business to minority owners O Going-concern value of a firm is equal to the present value of expected net income O On average, acquisitions create value for shareholders of the target firm

Financial Reporting, Financial Statement Analysis and Valuation

8th Edition

ISBN:9781285190907

Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Chapter13: Valuation: Earnings-based Approach

Section: Chapter Questions

Problem 1QE

See similar textbooks

Related questions

Q: In order to arrive at an intrinsic value for the stock of a company when using the Corporate…

A: Corporate Valuation Model:- This model is also known as the cash flow method, it helps in suggesting…

Q: Which of the following does NOT directly affect a company's cost of equity? Select one: a. Return…

A: The capital asset pricing model (CAPM) describes the relationship between the expected return and…

Q: If an acquisition does not create value and the market is smart, then the: Multiple Choice earnings…

A: Acquisition: when one firm purchases another firm

Q: hich statement about book value per share (BVPS) is true??? A. Market price per share usually…

A: When company start the operations than company issues shares and they are issued at very low prices…

Q: Which of the following is not a determinant of investment? a) The efficiency of capital equipment…

A: To increase capital assets, business do investments in property, fixed assets, financial market,…

Q: Which one of the following statements about book value and market value is correct? Group of answer…

A: Book values are based on the historical performance of the company. But market value gives the…

Q: How should (a) signaling and (b) the clienteleeffect be taken into account by a firm as it considers…

A: “Since you have asked multiple questions, we will solve the first question for you. If you want any…

Q: Choose the correct. Which of the following is not included in the assumption on which Myron Gorden…

A: Gorden Proposed Model: The market value of share is equal to the present value of future dividends.…

Q: Which of the following is false regarding book and market values? Select one: O a. Financial…

A: If the market does not trust that the firm is worth the value on its books, its market value might…

Q: Which of the following theories is supported by the argument that shareholders can transform a…

A: The correct answer is:b. "bird-in-the-hand" theoryExplanation:The "bird-in-the-hand" theory,…

Q: Which of the following statements is NOT CORRECT? why? The corporate valuation model can be used…

A: Corporate Valuation Model(CVM) is used to ascertain market value of business entities. CVM includes:…

Q: Which of the following statements is false regarding the abnormal earnings approach to valuation?…

A: Abnormal earning valuation This method of valuation helps to determine company’s net worth based on…

Q: Which one is more appropriate for cost of retained earning? A. Weighted Average cost of capital…

A: Retained earnings are the part of net income that is not distributed to the shareholders in form of…

Q: Which one of the following is minimized when the value of the firm is maximized? A- WACC B- Return…

A: To maximize the value of the firm, it is important to have a fair cash flow for the firm. Value of…

Q: Which statement about book value per share (BVPS) is true A. Market price per share usually…

A: Common shares the ordinary shares that are being issued by the company, on which dividends needs to…

Q: The market capitalisation of a brand as reflected by their share price on the stock exchange is…

A: The market capitalization of a firm is the entire current value of its equity. A corporation's…

Q: The assumption that a business enterprise will not be sold or liquidated in the foreseeable future…

A: “Since you have asked multiple question, we will solve the first question for you. If you want any…

Q: The higher the firm's flotation cost for new common equity, the more likely the firm is to use…

A: Flotation costs is defined as the costs, which are usually incurred through the publicly traded…

Q: Which one of the following statements is correct concerning both the dollar return and the…

A: The dollar return is the net return on the investment in the dollar terms, where as the percentage…

Q: The corporate valuation model cannot be used unless a company pays dividends. a. True b. False

A: The corporate valuation model beginnings with determining the estimation of the assets or resources…

Q: True or False Please answer both. 1. High cash flow is generally associated with a higher share…

A: Statement 1 : High cash flow is generally associated with a higher share price whereas higher risk…

Q: M-M theroy with perfect market suggests that divident payment: A.It dependes on the company's…

Q: Which of the following is NOT an acceptable basis on which to measure an expense? A cash outflow. O…

A: Measurement of expenses defines a projection of expenses to be incurred in a time frame or for an…

Question

which of the following statements is false?
O When a buyer values a target firm, the appropriate discount rate
is the target's weighted-average cost of capital
O Market value of a business measures the worth of that business
to minority owners
O Going-concern value of a firm is equal to the present value of
expected net income
O On average, acquisitions create value for shareholders of the
target firm

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!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step 3

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 3 steps

SEE SOLUTION Check out a sample Q&A here

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.

Similar questions

Which one of the following is minimized when the value of the firm is maximized? A- WACC B- Return on equity C-Debt D-Taxes E- Bankruptcy costs
M-M theroy with perfect market suggests that divident payment: A.It dependes on the company's capital structure and retained earnings B.Has a positive impact on the value of a firm C.Has a negative impact on the value of a firm D.Has no impact on the value of a firm
Which statement about book value per share (BVPS) is true???A. Market price per share usually approximates BVPS.B. BVPS can be misleading because it is based onhistorical cost.C. Market price per share greater than BVPS is anindication of an overvalued stockD. BVPS is the amount that would be paid to shareholdersif the firm is sold to another firm
Which statement about book value per share (BVPS) is true? A. Market price per share usually approximates BVPS. B. BVPS can be misleading because it is based on historical cost. C. Market price per share greater than BVPS is an indication of an overvalued stock. D. BVPS is the amount that would be paid to shareholders if the firm is sold to another firm.
The higher the firm's flotation cost for new common equity, the more likely the firm is to use preferred stock, which has no flotation cost, and reinvested earnings, whose cost is the average return on the assets that are acquired. Group of answer choices True False
How should (a) signaling and (b) the clienteleeffect be taken into account by a firm as it considers its dividend decision? Do signaling and clientele effects make it easier or harder to determineif investors prefer high or low payout ratios? Dothese factors influence the desirability of a stabledistribution policy versus one that is flexible andthus varies with the company’s cash flows andinvestment opportunities?
“The market capitalisation of a brand as reflected by their share price on the stock exchange isoften far higher than the actual asset value of the company.” Question) Evaluate this statement in relation to the difficulties encountered in valuing acompany when trying to sell it.
The cost of equity is _______. A. the interest associated with debt B. the rate of return required by investors to incentivize them to invest in a company C. the weighted average cost of capital D. equal to the amount of asset turnover
Use B&M’s data and the free cash flow valuation model to answer the following questions: What is its estimated value of operations? What is its estimated total corporate value? (This is the entity value.) What is its estimated intrinsic value of equity? What is its estimated intrinsic stock price per share?
Which of the following is NOT an acceptable basis on which to measure an expense? A cash outflow. O A pro rata measure. O An estimation. O All of these options are acceptable. O An invoice price. Which of the following is a likely explanation as to why preparers would choose to deliberately understate the reported profit of a listed entity? O To reduce investors' expectations of future earnings. O To decrease the entity's weighted average cost of capital. To reduce the entity's tax liability. O To satisfy the qualitative characteristic of faithful representation. O All of these are likely explanations why preparers would deliberately understate the reported profit.
Which one of the following statements about book value and market value is correct? Group of answer choices a. Both book value and market value are forward-looking. b. Both book value and market value account for all forms of assets and liabilities of a firm. c. The market value of equity should not differ much from the book value of equity. d. Decision-making should be based on market value instead of book value.
Which one is more appropriate for cost of retained earning? A. Weighted Average cost of capital B. Opportunity cost to the firm C. Expected rate of return by the investor D. None of the above