Exam 18: Equity Valuation Models

SI International had a FCFE of $122.1M last year and has 12.43M shares outstanding. SI's required return on equity is 11.3%, and WACC is 9.8%. If FCFE is expected to grow at 7.0% forever, the intrinsic value of SI's shares is

(Multiple Choice)

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Question 41

Each of two stocks, A and B, are expected to pay a dividend of $5 in the upcoming year. The expected growth rate of dividends is 10% for both stocks. You require a rate of return of 11% on stock A and a return of 20% on stock B. The intrinsic value of stock A

(Multiple Choice)

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Question 42

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 43

Boaters World is expected to have per share FCFE in year 1 of $1.65, per share FCFE in year 2 of $1.97, and per share FCFE in year 3 of $2.54. After year 3, per share FCFE is expected to grow at the rate of 8% per year. An appropriate required return for the stock is 11%. The stock should be worth _______ today.

(Multiple Choice)

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Question 44

Mature Products Corporation produces goods that are very mature in their product life cycles. Mature Products Corporation is expected to pay a dividend in year 1 of $2.00, a dividend of $1.50 in year 2, and a dividend of $1.00 in year 3. After year 3, dividends are expected to decline at a rate of 1% per year. An appropriate required rate of return for the stock is 10%. The stock should be worth

(Multiple Choice)

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Question 45

You are considering acquiring a common stock that you would like to hold for one year. You expect to receive both $0.75 in dividends and $16 from the sale of the stock at the end of the year. The maximum price you would pay for the stock today is _____ if you wanted to earn a 12% return.

(Multiple Choice)

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Question 46

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 47

The required rate of return on equity is the most appropriate discount rate to use when applying a ______ valuation model.

(Multiple Choice)

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Question 48

Because the DDM requires multiple estimates, investors should

(Multiple Choice)

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Question 49

The growth in per share FCFE of SYNK, Inc. is expected to be 8% per year for the next two years, followed by a growth rate of 4% per year for three years. After this five-year period, the growth in per share FCFE is expected to be 3% per year, indefinitely. The required rate of return on SYNC, Inc. is 11%. Last year's per share FCFE was $2.75. The first three dividends are worth _______ today.

(Multiple Choice)

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Question 50

Juice & Fruit Corp has an expected ROE of 9%. The dividend growth rate will be _______ if the firm follows a policy of plowing back 10% of earnings.

(Multiple Choice)

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Question 51

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 approximate beta of Risk Metrics's stock?

(Multiple Choice)

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Question 52

The most appropriate discount rate to use when applying a FCFE valuation model is the

(Multiple Choice)

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Question 53

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 54

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 55

A version of earnings management that became common in the 1990s was

(Multiple Choice)

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Question 56

If a firm follows a low-investment-rate plan (applies a low plowback ratio), its dividends will be _ now and _ in the future than a firm that follows a high-reinvestment-rate plan.

(Multiple Choice)

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Question 57

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)

4.9/5

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Question 58

Suppose that the average P/E multiple in the oil industry is 22. Exxon is expected to have an EPS of $1.50 in the coming year. The intrinsic value of Exxon stock should be

(Multiple Choice)

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Question 59

The ______ is a common term for the market consensus value of the required return on a stock.

(Multiple Choice)

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(74)

Question 60

Showing 41 - 60 of 128

Exam 18: Equity Valuation Models

SI International had a FCFE of $122.1M last year and has 12.43M shares outstanding. SI's required return on equity is 11.3%, and WACC is 9.8%. If FCFE is expected to grow at 7.0% forever, the intrinsic value of SI's shares is

Each of two stocks, A and B, are expected to pay a dividend of $5 in the upcoming year. The expected growth rate of dividends is 10% for both stocks. You require a rate of return of 11% on stock A and a return of 20% on stock B. The intrinsic value of stock A

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

You are considering acquiring a common stock that you would like to hold for one year. You expect to receive both $0.75 in dividends and $16 from the sale of the stock at the end of the year. The maximum price you would pay for the stock today is _____ if you wanted to earn a 12% return.

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

The required rate of return on equity is the most appropriate discount rate to use when applying a ______ valuation model.

Because the DDM requires multiple estimates, investors should

Juice & Fruit Corp has an expected ROE of 9%. The dividend growth rate will be _______ if the firm follows a policy of plowing back 10% of earnings.

The most appropriate discount rate to use when applying a FCFE valuation model is the

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

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

A version of earnings management that became common in the 1990s was

If a firm follows a low-investment-rate plan (applies a low plowback ratio), its dividends will be _______ now and _______ in the future than a firm that follows a high-reinvestment-rate plan.

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

Suppose that the average P/E multiple in the oil industry is 22. Exxon is expected to have an EPS of $1.50 in the coming year. The intrinsic value of Exxon stock should be

The ______ is a common term for the market consensus value of the required return on a stock.

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Risk, Return, and the Historical Record

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Empirical Evidence on Security Returns

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Options Markets: Introduction

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If a firm follows a low-investment-rate plan (applies a low plowback ratio), its dividends will be _ now and _ in the future than a firm that follows a high-reinvestment-rate plan.