Exam 17: Security Valuation and Selection

Big Joe's Burgers has a P/E ratio of 12 and a beta equal to 3.The risk-free rate is 8 percent and the return to the market has been 14 percent.The firm has an EPS of $5.00.What should be the current market price of Big Joe's stock?

Using the following financial data, determine the maximum dividends per share that can be paid to stockholders before the firm's value would be threatened.Base your answer on the economic value added model.

Factors that fundamentalists examine to determine future stock price movements include: I.Company conditions II.Industry conditions III.Economic & market conditions IV.Supply/demand relationships

Generally speaking, the P/E multiples are higher for firms with ____ expected growth rates and ____ expected required rates of return.

According to the Dow Theory, which one of the following is not one of the types of market movements that are possible?

The consensus advice from successful professional investors is that individuals should "buy and hold" their investments until either personal goals or market conditions change.

If security markets were truly strong-form efficient, then there would be no need for investors to evaluate the value of stocks because they could never earn abnormal returns.

The monetary policy of the United States is formulated and carried out by the Federal Reserve.

What is the expected price for the stock of a company that just paid a dividend of $3.00? The company has a dividend payout ratio of 50 percent, discount rate of 25 percent, and a P/E of 10.

Investors who search for "value" stocks are trying to find stocks that are mispriced in the markets.

The ____ includes all the goods and services produced in the economy during a specific time where value of the goods and services is adjusted for inflation.

If the financial markets are strong-form efficient, then stock analysis would be a waste of time because investors would not be able to earn abnormal returns, no matter how well the valuation models they use perform.

When the Federal Reserve wants to slow down the economy that is growing at an unsustainable rate, the Federal reserve can

The fiscal policy of the United States is dominated by deficit spending, which means the government spends more than it collects in taxes.

The EVA of a firm will be positive when

Methods (models) used by technical analysts are designed to identify short-term, temporary market movements that investors can use to earn abnormal returns.

If the industry P/E ratio normally varies from 15 to 20, which of the following prices is most appropriate for a company that has an EPS equal to $3?

Which of the following statements is correct?

All of the following variables must be estimated when using the dividend discount model for stock valuation except the

The value of any asset can be described as the present value of the cash expected to be generated by the asset during its life.