Exam 7: Valuing Stocks

How can you reconcile the fact that whether an investor favors dividends or capital gains,the investor should accept the dividend discount model as a determination of share value?

The dividend discount model indicates that the value of a stock is the present value of the dividends it will pay over the investor's horizon plus the present value of the expected stock price at the end of that horizon.

If a stock's P/E ratio is 13.5 at a time when earnings are $3 per year,what is the stock's current price?

How do you estimate expected rates of return in the constant-growth dividend discount model?

If no price change occurs in a stock on the day that it announces its next dividend,it can be assumed that:

The term "irrational exuberance" was coined by former Fed Chairman Alan Greenspan to describe the dot-com boom.

How much should you pay for a share of stock that offers a constant-growth rate of 10%,requires a 16% rate of return,and is expected to sell for $50 one year from now?

Sustainable growth rates can be estimated by multiplying a firm's ROE by its dividend payout ratio.

What constant-growth rate in dividends is expected for a stock valued at $32.00 if next year's dividend is forecast at $2.00 and the appropriate discount rate is 13%?

Firms having a higher expected return have a higher:

Strong-form market efficiency implies that one could earn above-average returns by examining the history of a firm's stock price.

If The Wall Street Journal lists a stock's dividend as $1,then it is most likely the case that the stock:

According to the dividend discount model,a stock's price today depends on the investor's horizon for holding the stock.

An investor is faced with the decision of whether to invest in a stock with an expected return of 14% or a stock in the same industry with an expected 20% return.Which of the following seems most likely?

Dividing a stock's earnings per share by the expected rate of return will value the share correctly if no new shares are issued and the dividend yield:

Common stock can be valued using the perpetuity valuation formula if the:

Which of the following observations provides evidence against strong-form market efficiency?

What is the return on equity for a firm that has a constant dividend growth rate of 7% and a dividend payout ratio of 60%?

If a stock's price decreased during the past week,what is the most likely prediction about this week's price change?

The value of common stock will likely decrease if: