multible choice, In applying the constant-growth dividend model, increasing the market capitalization rate will cause a stock’s intrinsic value to? why? decrease increase remain unchanged. decrease or increase, depending upon other factors.
Q: Common stock may be valued using the following, except: Group of answer choices Constant growth…
A: The constant growth model, Super normal growth model and Zero growth model is a way of valuing…
Q: The value of the stock: Group of answer choices Increases as the required rate of return…
A: As per Gordon growth model the value of stock: P= D1/r-g where: P=Current stock price g= Constant…
Q: How does a fundamental analyst interpret the support level as the price range? Group of answer…
A: There are two types of analysis a) Fundamental analysis b) Technical analysis
Q: d. Suppose a new stock, C, with f = 18% and b = 2.0, becomes avail- able. Is this stock in…
A: Beta is calculated by slope function in excel with market return as known x and stock return as…
Q: One of the following decisions is not taken to increase the stock price: Select one: a. Maximize…
A: The Following decision will increase the stock price: Maximize the income or profit from the income…
Q: QUESTION 24 All of the following methods may be used to determine the cost of equity capital…
A: Cost of equity is the required return for investor who are invested money in a equity capital.
Q: he zero-growth model of stock valuation; a. implies a zero growth in stock price over time b.…
A: Zero growth model of stock valuation assume that the firm will pay the same dividend forever. There…
Q: The constant-growth dividend model will provide invalid solutions when: the growth rate of the stock…
A: the question is based on the valuation of stock by dividend discounting model in case constant…
Q: What is the effect in the stock valuation if the growth rate increase by the same rate as the…
A: Stock can be defined as the type of financial instrument being offered by the companies or business…
Q: According to the weak-form efficient market hypothesis, which of the following types of information…
A: WEAK FORM EFFICIENT MARKET HYPOTHESIS: ALL PAST DATA ARE REFLECTED IN THE PRICES OF THE STOCK.
Q: . In general, what are some characteristics of stocksfor which a dividend growth model is…
A: Answer: Companies making dividend payments and expecting dividend growth at predictable rates must…
Q: Analysis Questions of Stock Valuation The "stock valuation model" referred to in the questions below…
A: Dividend: It is that portion of the company’s profit that is distributed between the shareholders…
Q: Share Price can be determined by the cash flows and risk. Assume other things held constant,…
A: Stock Prices are moved based on the various factors affecting the stock such as discounting factors…
Q: Which of the statements is NOT TRUE about the yield of a stock? a) It is comprised of dividend yield…
A: Capital Gain/Loss: It refers to the change in the value of an investment made by an individual or an…
Q: Which one of the following statements is correct? The dividend growth model can be used to compute…
A: In finance we often use the dividend growth model to value stocks. The model is based on the premise…
Q: Assuming that the required rate of return is determined by the CAPM, explain how you would usethe…
A: Given: The required rate of return is determined by the CAPM and the dividend growth model to…
Q: If the expected rate of return on a stock is less than its required rate of return, investors will…
A: The expected return on the stock is compared with the required return on that stock to identify over…
Q: The "stock valuation model" referred to in the questions below relate to the whether the fundamental…
A: Stock valuation models: Residual income approach- Under this approach, the intrinsic value of a…
Q: Consider a perpetual preferred share paying a fixed dividend. What will happen to the market value…
A: When it comes to receiving dividends from the corporation, preferred shareholders would take…
Q: The Dividend-Discount Model (DDM) can only be used to value stocks that are currently paying…
A: Answer: The answer is TRUE.
Q: b. Now calculate the cost of common equity from retained earnings, using the CAPM method. c. What is…
A: After tax cost of debt is the cost of debt after deducting the taxes. After-tax cost of debt =…
Q: The dividend growth model of stock evaluation relies on several assumptions that might not be true…
A: Dividend growth model is defined as valuing the stock price of the company based on certain theories…
Q: Which among the following statement is correct about Theoretical ex- right price of right issue:…
A: The theoretical ex-rights price is the price that is estimated for the share following the right…
Q: The return on a stock, in a factor model
A: Introduction: Factor models are financial models which uses various factors like technical factors,…
Q: QUESTION 25 The constant growth valuation model approach to calculating the cost of equity assumes…
A: Constant Growth Valuation Model Approach assumes that a company's dividends are going to continue to…
Q: Define each of the following terms:a. Target payout ratio; optimal dividend policyb. Dividend…
A: Target payout ratio; optimal dividend policy: A target payout ratio is a percentage of a company's…
Q: Apart from using PE ratio, what is another way of valuing the stock price? if we have the EPS, Share…
A: Price earning ratio is used to value a company's share price. It is calculated by dividing the…
Q: How will the change in required return influence the price of a stock? How will the dividend growth…
A: The Gordon growth model calculates the price of the stock by using the dividends, growth rate of…
Q: “The constant-growth model should not be used with just any stock.” Explain with reasons the…
A: Intrinsic value of a company can be determined by finding the present value of the future expected…
Q: Reverse engineering share prices is an exercise in deductive reasoning. If we assume market price…
A: Please find the answer to the above question below:
Q: One way to model an option with dividends in the binomial framework is for the stock price minus the…
A: Binomial option pricing is used to value options by taking multiple periods and the outcome of up…
Q: State whether the following statements are true or false. Efficient Market Hypothesis means…
A: Efficient market hypothesis (EMH) states that the prices in the market reflects all the available…
Q: What is the required return on common stock using CAPM? % Use the retention growth equation to…
A: Required Rate of Return: It represents the expected return on common stock from the investors. It…
Q: Price-earnings valuation multiples make the following strong assumptions: a. Earnings are…
A: Price-earnings valuation: It refer to the method of valuation of shares based upon its earnings.…
Q: If a firm takes steps that increase its expected future ROE, does this necessarily meanthat the…
A: Return on Equity (ROE) is the measure of a company’s annual return. The formula to calculate Return…
Q: hat is the relationship between the expected return of a stock and its fair expected return? When is…
A: Step 1 The anticipated return is the profit or loss that an investor expects from a known…
Q: The constant growth DCF model used to evaluate the prices of common stocks isconceptually similar to…
A: Answer -true.
Q: Which of the following statements is correct in relation to a stock investment? I. The capital gains…
A: Total Return is comprised of capital gain yield and dividend yield.
Q: Which of the following statement is TRUE? Preference shares have: A. variable dividends and stable…
A: Preference shares is share that have priority over the common stock.
Q: The free cash flow valuation model is based on the same principle as dividend valuation models; that…
A: Free cash flow can be used to determine the value of a share price. It uses the same principle of…
multible choice, In applying the constant-growth dividend model, increasing the market capitalization rate will cause a stock’s intrinsic value to? why?
- decrease
- increase
- remain unchanged.
- decrease or increase, depending upon other factors.
Step by step
Solved in 2 steps
- One of the following decisions is not taken to increase the stock price: Select one: a. Maximize costs b. Attracting additional funds c. Maximize net income or profit d. Returning profits to owners over timeWhen is it appropriate to use the dividend valuation models, such as the Zero Growth Model, constant growth model and variable growth model, in estimating the price of a stock?Apart from using PE ratio, what is another way of valuing the stock price? if we have the EPS, Share Price, Dividend Per Share, ROE and the discount rate (R). And what are the assumptions and the limitations of this model? What can be said about the dividend growth model? Similarly what can be said about the capital asset pricing model?
- Assuming that the required rate of return is determined by the CAPM, explain how you would usethe dividend growth model to estimate the pricefor Stock i. Indicate what data you would need,and give an example of a “reasonable” value foreach data input. How would this be differentif you used free cash flows as the basis for yourevaluation?Which of the following will increase the price of a stock? Group of answer choices: A. Decrease in the required rate of return B. Decrease in the dividend growth rate C. Delay in the payment of dividends D. Decrease in earnings growthCompare and contrast constant growth model and zero growth model in stock valuation. Support your answer with examples.
- When using the two - stage dividend growth model,:Multiple Choiceg1 cannot be negative. Pt = Dt/R. g1 must be greater than g2. g1 can be greater than R. R must be less than g1 but greater than g2.The value of an asset is the present value of the expected returns from the asset during theholding period. An investment will provide a stream of returns during this period, and it isnecessary to discount this stream of returns at an appropriate rate to determine the asset’spresent value. A dividend valuation model such as the following is frequent. where:Pi = the current price of Common Stock iD1 = the expected dividend in Period 1ki = the required rate of return on Stock igi = the expected constant-growth rate of dividends for Stock iA. Identify the three factors that must be estimated for any valuation model, and explain whythese estimates are more difficult to derive for common stocks than for bonds.B. Explain the principal problem involved in using a dividend valuation model to value :(1) companies whose operations are closely correlated with economic cycles.(2) companies that are of very large and mature.(3) companies that are quite small and are growing rapidly.PART I. a. What is the effect in the stock valuation if the growth rate increase by the same rate as the increase in discount rate? b. What do you think is the disadvantage of using the relative techniques in valuation compared to discounted cash flow techniques? c. What do you think is the disadvantage of using the relative techniques in valuation compared to discounted cash flow techniques?
- Apart from using PE ratio, what is another way of valuing the stock price? if we have the EPS, Share Price, Dividend Per Share, ROE and the discount rate (R). And what are the assumptions and the limitations of this model? Is it the PEG ratio or not??In the Discounted Cash Flow Model (aka. Dividend Valuation Model) for cost of equity, if an asset has no expected dividend, its expected return would be best described as the _________. (A).dividend yield. (B).market risk premium. (C).expected market return. (D).capital gains yieldSuppose we observe from market data that, for a given non-dividend paying stock, See ImageWhat might explain the inequality in this relationship, is markets are efficient or does result in arbitrage opportunities?