Exam 14: Valuation: Market-Based Approaches

The PE multiple assumes that firm value is the present value of a constant stream of _____________________________________________,discounted at a constant expected future discount rate.

(Short Answer)

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Question 41

The ______________________________ represents the value of the firm,based on book value of equity and forecasts of expected future earnings,in the absence of discounting for risk.

(Short Answer)

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Question 42

A company is expected to have a value of $142,857 at the start of next period and investors require a 14 percent return on equity capital.Using the assumptions of the price-earnings ratio,what would be the company's earnings for the current year?

(Multiple Choice)

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Question 43

The value-to-book model indicates that a firm in steady state equilibrium earnings ROCE=R_E will be valued at _________________________.

(Short Answer)

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Question 44

The market price of a share of common equity reflects

(Multiple Choice)

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Question 45

What methods have been developed to incorporate growth into price-earnings ratios? How do the methods incorporate growth? What are the advantages and/or disadvantages of these methods?

(Essay)

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Question 46

The ______________________________ represents the difference between the current stock price and risk-neutral value.

(Short Answer)

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Question 47

Assume an analyst is evaluating a firm with $1,000 of book value of common equity and a cost of equity capital equal to 12 percent.Assume that the analyst forecasts that the firm will earn ROCE of 18 percent until year 2015,when the firm will start earning ROCE equal to 12 percent.The company pays no dividends and will not engage in any stock transactions.Use this information to complete the following table and calculate the firm's value-to-book ratio.

(Essay)

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Question 48

Which of the following normally does not introduce measurement error into the calculation of P/E ratios?

(Multiple Choice)

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Question 49

A company with a PEG ratio of greater than one would be interpreted as having a stock price that is high relative to ______________________________.

(Short Answer)

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Question 50

Which of the following ratios give a perspective on risk in the capital structure?

(Multiple Choice)

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Question 51

Market multiples capture ____________________ valuation per dollar of book value or per dollar of earnings.

(Short Answer)

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Question 52

Which of the following would not be an example of the use of a multiple when valuing common equity?

(Multiple Choice)

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Question 53

One problem with the price-earnings ratios commonly reported is that

(Multiple Choice)

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Question 54

Assume a zero-growth rate for earnings and dividends in each situation below.Also assume that all earnings are paid out as dividends and that the earnings-based valuation model is being used. Situation 1: Das Company's earnings are expected to be $9 per share and its stock price is $36.What is the required rate of return on the firm's equity? Situation 2: South Company's earnings are expected to be $6 per share and its required rate of return on equity is 26%.What is the current price of the stock? Situation 3: Jones Company's current stock price is $60 and its required rate of return on equity is 15%.What is the firm's expected earnings?

(Essay)

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Question 55

The market-to-book ratio is calculated by

(Multiple Choice)

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Question 56

The value-to-book ratio reflects an analyst's expectation of the firm's ____________________ value to book value.

(Short Answer)

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Question 57

Trading on the equity is likely to be a good financial strategy for stockholders of companies having:

(Multiple Choice)

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Question 58

Under the value-to-book model a firm will be valued below book value when

(Multiple Choice)

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Question 59

All of the following are economic factors that will decrease a firm's value-to-book ratio over time except:

(Multiple Choice)

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Question 60

Showing 41 - 60 of 64

The PE multiple assumes that firm value is the present value of a constant stream of _____________________________________________,discounted at a constant expected future discount rate.

The ______________________________ represents the value of the firm,based on book value of equity and forecasts of expected future earnings,in the absence of discounting for risk.

A company is expected to have a value of $142,857 at the start of next period and investors require a 14 percent return on equity capital.Using the assumptions of the price-earnings ratio,what would be the company's earnings for the current year?

The value-to-book model indicates that a firm in steady state equilibrium earnings ROCE=R_E will be valued at _________________________.

The market price of a share of common equity reflects

What methods have been developed to incorporate growth into price-earnings ratios? How do the methods incorporate growth? What are the advantages and/or disadvantages of these methods?

The ______________________________ represents the difference between the current stock price and risk-neutral value.

Which of the following normally does not introduce measurement error into the calculation of P/E ratios?

A company with a PEG ratio of greater than one would be interpreted as having a stock price that is high relative to ______________________________.

Which of the following ratios give a perspective on risk in the capital structure?

Market multiples capture ____________________ valuation per dollar of book value or per dollar of earnings.

Which of the following would not be an example of the use of a multiple when valuing common equity?

One problem with the price-earnings ratios commonly reported is that

The market-to-book ratio is calculated by

The value-to-book ratio reflects an analyst's expectation of the firm's ____________________ value to book value.

Trading on the equity is likely to be a good financial strategy for stockholders of companies having:

Under the value-to-book model a firm will be valued below book value when

All of the following are economic factors that will decrease a firm's value-to-book ratio over time except:

Overview of Financial Reporting, Financial Statement Analysis, and Valuation

Asset and Liability Valuation and Income Measurement

Income Flows Versus Cash Flows: Understanding the Statement of Cash Flows

Profitability Analysis

Risk Analysis

Financing Activities

Investing Activities

Operating Activities

Accounting Quality

Forecasting Financial Statements

Risk-Adjusted Expected Rates of Return and the Dividends Valuation Approach

Valuation: Cash-Flow-Based Approaches

Valuation: Earnings-Based Approaches

Filters

Exam 14: Valuation: Market-Based Approaches

The PE multiple assumes that firm value is the present value of a constant stream of _____________________________________________,discounted at a constant expected future discount rate.

The ______________________________ represents the value of the firm,based on book value of equity and forecasts of expected future earnings,in the absence of discounting for risk.

A company is expected to have a value of $142,857 at the start of next period and investors require a 14 percent return on equity capital.Using the assumptions of the price-earnings ratio,what would be the company's earnings for the current year?

The value-to-book model indicates that a firm in steady state equilibrium earnings ROCE=RE will be valued at _________________________.

The market price of a share of common equity reflects

What methods have been developed to incorporate growth into price-earnings ratios? How do the methods incorporate growth? What are the advantages and/or disadvantages of these methods?

The ______________________________ represents the difference between the current stock price and risk-neutral value.

Which of the following normally does not introduce measurement error into the calculation of P/E ratios?

A company with a PEG ratio of greater than one would be interpreted as having a stock price that is high relative to ______________________________.

Which of the following ratios give a perspective on risk in the capital structure?

Market multiples capture ____________________ valuation per dollar of book value or per dollar of earnings.

Which of the following would not be an example of the use of a multiple when valuing common equity?

One problem with the price-earnings ratios commonly reported is that

The market-to-book ratio is calculated by

The value-to-book ratio reflects an analyst's expectation of the firm's ____________________ value to book value.

Trading on the equity is likely to be a good financial strategy for stockholders of companies having:

Under the value-to-book model a firm will be valued below book value when

All of the following are economic factors that will decrease a firm's value-to-book ratio over time except:

Overview of Financial Reporting, Financial Statement Analysis, and Valuation

Asset and Liability Valuation and Income Measurement

Income Flows Versus Cash Flows: Understanding the Statement of Cash Flows

Profitability Analysis

Risk Analysis

Financing Activities

Investing Activities

Operating Activities

Accounting Quality

Forecasting Financial Statements

Risk-Adjusted Expected Rates of Return and the Dividends Valuation Approach

Valuation: Cash-Flow-Based Approaches

Valuation: Earnings-Based Approaches

Filters

The value-to-book model indicates that a firm in steady state equilibrium earnings ROCE=R_E will be valued at _________________________.