Number of pages: |
1 (Double Spaced)
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Number of sources: |
1
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Order type: |
Coursework
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Category: |
Finance
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Academic level: |
Undergraduate
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Style: |
APA
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- 1.A stock has an intrinsic value of $15 and an actual stock price of $13.50. You know that this stock ________.
Answer
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has a Tobin's Q value < 1 |
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is under valued |
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has an expected return less than its required return |
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has a beta > 1 |
1 points
Question 2
- 1.
A firm cuts its dividend payout ratio. As a result you know that the firm's _______.
Answer
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return on assets will increase |
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earnings retention ratio will increase |
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earnings growth rate will fall |
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stock price will fall |
1 points
Question 3
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The constant growth dividend discount model (DDM) can be used only when the ___________.
Answer
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growth rate is less than or equal to the required return |
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growth rate is greater than or equal to the required return |
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growth rate is less than the required return |
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growth rate is greater than the required return |
1 points
Question 4
- 1.
You wish to earn a return of 10% on each of two stocks, A and B. Each of the stocks is expected to pay a dividend of $4 in the upcoming year. The expected growth rate of dividends is 6% for stock A and 5% for stock B. Using the constant growth DDM, the intrinsic value of stock A _________.
Answer
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will be higher than the intrinsic value of stock B |
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will be the same as the intrinsic value of stock B |
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will be less than the intrinsic value of stock B |
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more information is necessary to answer this question |
1 points
Question 5
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You are considering acquiring a common share of Sahali Shopping Center Corporation that you would like to hold for one year. You expect to receive both $1.25 in dividends and $35 from the sale of the share in one year. The maximum price you would pay for a share today is __________ if you wanted to earn a 12% return.
Answer
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$31.25 |
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$32.37 |
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$38.47 |
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$41.32 |
1 points
Question 6
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Weyerhaeuser Incorporated has a balance sheet which lists $70 million in assets, $45 million in liabilities and $25 million in common shareholders' equity. It has 1,000,000 common shares outstanding. The replacement cost of its assets is $85 million. Its share price in the market is $49. Its book value per share is _________.
Answer
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$16.67 |
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$25.00 |
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$37.50 |
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$40.83 |
1 points
Question 7
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Gagliardi Way Corporation has an expected ROE of 15%. If it pays out 30% of it earnings as dividends, its dividend growth rate will be _____.
Answer
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4.5% |
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10.5% |
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15.0% |
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30.0% |
1 points
Question 8
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A preferred share of Coquihalla Corporation will pay a dividend of $8.00 in the upcoming year, and every year thereafter, i.e., dividends are not expected to grow. You require a return of 7% on this stock. Using the constant growth DDM to calculate the intrinsic value, a preferred share of Coquihalla Corporation is worth _________.
Answer
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$13.50 |
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$45.50 |
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$91.00 |
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$114.29 |
1 points
Question 9
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A firm is planning on paying its first dividend of $2 in three years. Then dividends are expected to grow at 6% per year indefinitely. The stock's required return is 14%. What is the intrinsic value of a share today?
Answer
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$25.00 |
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$16.87 |
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$19.24 |
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$20.99 |
1 points
Question 10
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Rose Hill Trading Company is expected to have EPS in the upcoming year of $8.00. The expected ROE is 18.0%. An appropriate required return on the stock is 14%. If the firm has a plowback ratio of 70%, its dividend in the upcoming year should be _________.
Answer
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$1.12 |
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$1.44 |
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$2.40 |
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$5.60 |
1 points
Question 11
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Firms with higher expected growth rates tend to have P/E ratios that are ___________ the P/E ratios of firms with lower expected growth rates.
Answer
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higher than |
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equal to |
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lower than |
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There is not necessarily any linkage between risk and P/E ratios |
1 points
Question 12
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Westsyde Tool Company is expected to pay a dividend of $1.50 in the upcoming year. The risk-free rate of return is 6% and the expected return on the market portfolio is 14%. Analysts expect the price of Westsyde Tool Company shares to be $29 a year from now. The beta of Westsyde Tool Company's stock is 1.20. Using the CAPM, an appropriate required return on Westsyde Tool Company's stock is _________.
Answer
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8.0% |
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10.8% |
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15.6% |
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16.8% |
1 points
Question 13
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Lifecycle Motorcycle Company is expected to pay a dividend in year 1 of $2.00, a dividend in year 2 of $3.00, and a dividend in year 3 of $4.00. After year 3, dividends are expected to grow at the rate of 7% per year. An appropriate required return for the stock is 12%. Using the multistage DDM, the stock should be worth __________ today.
Answer
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$63.80 |
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$65.13 |
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$67.95 |
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$85.60 |
1 points
Question 14
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Transportation stocks currently provide an expected rate of return of 15%. TTT, a large transportation company, will pay a year-end dividend of $3 per share. If the stock is selling at $60 per share, what must be the market's expectation of the constant growth rate of TTT dividends?
Answer
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5% |
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10% |
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20% |
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None of the above |
1 points
Question 15
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The EBIT of a firm is $300, the tax rate is 35%, the depreciation is $20, capital expenditures are $60, the increase in net working capital is $30 and the increase in debt was $60 and What is the free cash flow to the firm?
Answer
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$85 |
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$125 |
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$185 |
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$305 |
1 points
Question 16
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The free cash flow to the firm is $300 million in perpetuity, the cost of equity equals 14% and the WACC is 10%. If the market value of the debt is $1.0 billion, what is the value of the stock assuming 1 billion shares outstanding?
Answer
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$2 billion |
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$2 |
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$3 |
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$4 |
1 points
Question 17
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The free cash flow to the firm is reported as $205 million. The interest expense to the firm is $22 million. If the tax rate is 35% and the net debt of the firm increased by $25, what is the market value of the firm if the FCFE grows at 2% and the cost of equity is 11%? Hint: calculate FCFE using FCFF and the other information given.
Answer
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$2,168 billion |
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$2,397 billion |
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$2,565 billion |
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$2,998 billion |
1 points
Question 18
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The greatest value to an analyst from calculating a stock's intrinsic value is _______.
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how easy it is to come up with accurate model inputs |
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the precision of the value estimate |
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how the process forces analysts to understand the critical variables that have the greatest impact on value |
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how all the different models typically yield identical value results |
1 points
Question 19
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You are valuing the common shares of a mature company that competes in a mature industry. The company's dividends and earnings are expected to grow at a constant 3%/year. Which would be the most appropriate model to value these shares?
Answer
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Gordon growth model |
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No growth model |
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Three stage dividend discount model |
1 points
Question 20
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The primary difference between the trailing twelve month PE ratio and the forward PE ratio is that the forward PE ratio takes into account:
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Future expectations |
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The law of one price |
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historical information |
1 points
Question 21
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The Berkeley Ganja Co-op is a purveyor of fine herbal remedies. Their stock has had the following historical PE ratios from 2005 - 2009: 6.7, 7.2, 5.9, 6.9 and 7.1. As of 2010 their PE ratio is 8.4. The stock is most likely _______________.
Answer
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under valued |
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fairly valued |
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over valued |
1 points
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