A) is a generalization of the perpetuity formula to cover the case of a growing perpetuity. B) is valid only when g is less than k. C) is valid only when k is less than g. D) is a generalization of the perpetuity formula to cover the case of a growing perpetuity and is valid only when g is less than k. A) is a generalization of the perpetuity formula to cover the case of a growing perpetuity. B) is valid only when g is less than k. C) is valid only when k is less than g. D) is a generalization of the perpetuity formula to cover the case of a growing perpetuity and is valid only when g is less than k.

Exam 18: Equity Valuation Models

You wish to earn a return of 13% on each of two stocks, X and Y.Stock X is expected to pay a dividend of $3 in the upcoming year while stock Y is expected to pay a dividend of $4 in the upcoming year.The expected growth rate of dividends for both stocks is 7%.The intrinsic value of stock X

(Multiple Choice)

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Question 41

Risk Metrics Company is expected to pay a dividend of $3.50 in the coming year.Dividends are expected to grow at a rate of 10% per year.The risk-free rate of return is 5%, and the expected return on the market portfolio is 13%.The stock is trading in the market today at a price of $90.00. What is the market-capitalization rate for Risk Metrics?

(Multiple Choice)

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Question 42

A preferred stock will pay a dividend of $2.75 in the upcoming year and every year thereafter; i.e., dividends are not expected to grow.You require a return of 10% on this stock.Use the constant growth DDM to calculate the intrinsic value of this preferred stock.

(Multiple Choice)

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Question 43

Sure Tool Company is expected to pay a dividend of $2 in the upcoming year.The risk-free rate of return is 4%, and the expected return on the market portfolio is 14%.Analysts expect the price of Sure Tool Company shares to be $22 a year from now.The beta of Sure Tool Company's stock is 1.25. The market's required rate of return on Sure's stock is

(Multiple Choice)

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Question 44

Zero had a FCFE of $4.5M last year and has 2.25M shares outstanding.Zero's required return on equity is 10%, and WACC is 8.2%.If FCFE is expected to grow at 8% forever, the intrinsic value of Zero's shares is

(Multiple Choice)

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Question 45

A preferred stock will pay a dividend of $6.00 in the upcoming year and every year thereafter; i.e., dividends are not expected to grow.You require a return of 10% on this stock.Use the constant growth DDM to calculate the intrinsic value of this preferred stock.

(Multiple Choice)

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Question 46

Sure Tool Company is expected to pay a dividend of $2 in the upcoming year.The risk-free rate of return is 4%, and the expected return on the market portfolio is 14%.Analysts expect the price of Sure Tool Company shares to be $22 a year from now.The beta of Sure Tool Company's stock is 1.25. What is the intrinsic value of Sure's stock today?

(Multiple Choice)

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Question 47

The market-capitalization rate on the stock of Flexsteel Company is 12%.The expected ROE is 13%, and the expected EPS are $3.60.If the firm's plowback ratio is 75%, the P/E ratio will be

(Multiple Choice)

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Question 48

A firm has a return on equity of 14% and a dividend-payout ratio of 60%.The firm's anticipated growth rate is

(Multiple Choice)

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Question 49

An analyst has determined that the intrinsic value of Dell stock is $34 per share using the capitalized earnings model.If the typical P/E ratio in the computer industry is 27, then it would be reasonable to assume the expected EPS of Dell in the coming year will be

(Multiple Choice)

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Question 50

SGA Consulting had a FCFE of $3.2M last year and has 3.2M shares outstanding.SGA's required return on equity is 13%, and WACC is 11.5%.If FCFE is expected to grow at 8.5% forever, the intrinsic value of SGA's shares is

(Multiple Choice)

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Question 51

See Candy had a FCFE of $6.1M last year and has 2.32M shares outstanding.See's required return on equity is 10.6%, and WACC is 9.3%.If FCFE is expected to grow at 6.5% forever, the intrinsic value of See's shares is

(Multiple Choice)

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Question 52

Seaman had a FCFE of $4.6B last year and has 113.2M shares outstanding.Seaman's required return on equity is 11.6%, and WACC is 10.4%.If FCFE is expected to grow at 5% forever, the intrinsic value of Seaman's shares is

(Multiple Choice)

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Question 53

Earnings management is

(Multiple Choice)

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Question 54

Xlink Company has an expected ROE of 15%.The dividend growth rate will be _______ if the firm follows a policy of plowing back 75% of earnings.

(Multiple Choice)

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Question 55

Lamm Corporation is expected have EBIT of $6.2M this year.Lamm Corporation is in the 40% tax bracket, will report $1.2M in depreciation, will make $1.4M in capital expenditures, and will have a $160,000 increase in net working capital this year.What is Lamm's FCFF?

(Multiple Choice)

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Question 56

An analyst has determined that the intrinsic value of IBM stock is $80 per share using the capitalized earnings model.If the typical P/E ratio in the computer industry is 22, then it would be reasonable to assume the expected EPS of IBM in the coming year is

(Multiple Choice)

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Question 57

The Gordon model

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Question 58

Rome Corporation is expected have EBIT of $2.3M this year.Rome Corporation is in the 30% tax bracket, will report $175,000 in depreciation, will make $175,000 in capital expenditures, and will have no change in net working capital this year.What is Rome's FCFF?

(Multiple Choice)

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Question 59

Fools Gold Mining Company is expected to pay a dividend of $8 in the upcoming year.Dividends are expected to decline at the rate of 2% per year.The risk-free rate of return is 6%, and the expected return on the market portfolio is 14%.The stock of Fools Gold Mining Company has a beta of -0.25.The return you should require on the stock is

(Multiple Choice)

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Question 60

Showing 41 - 60 of 106

Exam 18: Equity Valuation Models

You wish to earn a return of 13% on each of two stocks, X and Y.Stock X is expected to pay a dividend of $3 in the upcoming year while stock Y is expected to pay a dividend of $4 in the upcoming year.The expected growth rate of dividends for both stocks is 7%.The intrinsic value of stock X

A preferred stock will pay a dividend of $2.75 in the upcoming year and every year thereafter; i.e., dividends are not expected to grow.You require a return of 10% on this stock.Use the constant growth DDM to calculate the intrinsic value of this preferred stock.

Zero had a FCFE of $4.5M last year and has 2.25M shares outstanding.Zero's required return on equity is 10%, and WACC is 8.2%.If FCFE is expected to grow at 8% forever, the intrinsic value of Zero's shares is

A preferred stock will pay a dividend of $6.00 in the upcoming year and every year thereafter; i.e., dividends are not expected to grow.You require a return of 10% on this stock.Use the constant growth DDM to calculate the intrinsic value of this preferred stock.

The market-capitalization rate on the stock of Flexsteel Company is 12%.The expected ROE is 13%, and the expected EPS are $3.60.If the firm's plowback ratio is 75%, the P/E ratio will be

A firm has a return on equity of 14% and a dividend-payout ratio of 60%.The firm's anticipated growth rate is

An analyst has determined that the intrinsic value of Dell stock is $34 per share using the capitalized earnings model.If the typical P/E ratio in the computer industry is 27, then it would be reasonable to assume the expected EPS of Dell in the coming year will be

SGA Consulting had a FCFE of $3.2M last year and has 3.2M shares outstanding.SGA's required return on equity is 13%, and WACC is 11.5%.If FCFE is expected to grow at 8.5% forever, the intrinsic value of SGA's shares is

See Candy had a FCFE of $6.1M last year and has 2.32M shares outstanding.See's required return on equity is 10.6%, and WACC is 9.3%.If FCFE is expected to grow at 6.5% forever, the intrinsic value of See's shares is

Seaman had a FCFE of $4.6B last year and has 113.2M shares outstanding.Seaman's required return on equity is 11.6%, and WACC is 10.4%.If FCFE is expected to grow at 5% forever, the intrinsic value of Seaman's shares is

Earnings management is

Xlink Company has an expected ROE of 15%.The dividend growth rate will be _______ if the firm follows a policy of plowing back 75% of earnings.

Lamm Corporation is expected have EBIT of $6.2M this year.Lamm Corporation is in the 40% tax bracket, will report $1.2M in depreciation, will make $1.4M in capital expenditures, and will have a $160,000 increase in net working capital this year.What is Lamm's FCFF?

An analyst has determined that the intrinsic value of IBM stock is $80 per share using the capitalized earnings model.If the typical P/E ratio in the computer industry is 22, then it would be reasonable to assume the expected EPS of IBM in the coming year is

The Gordon model

Rome Corporation is expected have EBIT of $2.3M this year.Rome Corporation is in the 30% tax bracket, will report $175,000 in depreciation, will make $175,000 in capital expenditures, and will have no change in net working capital this year.What is Rome's FCFF?

The Investment Environment

Financial Markets, Asset Classes and Financial Instruments

How Securities Are Traded

Mutual Funds and Other Investment Companies

Risk, Return, and the Historical Record

Capital Allocation to Risky Assets

Optimal Risky Portfolios

Index Models

The Capital Asset Pricing Model

Arbitrage Pricing Theory and Multifactor Models of Risk and Return

The Efficient Market Hypothesis

Behavioural Finance and Technical Analysis

Empirical Evidence on Security Returns

Bond Prices and Yields

The Term Structure of Interest Rates

Managing Bond Portfolios

Macroeconomic and Industry Analysis

Financial Statement Analysis

Options Markets: Introduction

Option Valuation

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Futures, Swaps, and Risk Management

Portfolio Performance Evaluation

International Diversification

Hedge Funds

The Theory of Active Portfolio Management

Investment Policy and the Framework of the Cfa Institute

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