Exam 9: The Top-Down Approach to Market, Industry, and Company Analysis

The dividend payout ratio for the aggregate market is 65 percent, the required rate of return is 13 percent, and the expected growth rate for dividends is 8 percent. Compute the current earnings multiple.

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) -Refer to Exhibit 9.18. What is the required rate of return for Stock Y based on the capital asset pricing model (CAPM)?

Interest rate spread, 10-year Treasury bonds less federal funds, is listed as a lagging indicator in the Conference Board.

In well developed economies, markets are not affected by changes in expected inflation.

What is the implied growth duration of Bowe Industries given the following:

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) You are using the free cash flow to equity (FCFE) technique to analyze the U.S. equity market. The beginning FCFE is $90, and the required rate of return is 10 percent. Free cash flows are expected to grow at a 10 percent rate for the next two years and then grow at a constant rate of 7 percent forever. -Refer to Exhibit 9.7. What is the estimated value of the U.S. market today using the FCFE approach?

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) -Refer to Exhibit 9.18. What is the required rate of return for Stock X based on the capital asset pricing model (CAPM)?

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) Consider the following information that you propose to use to obtain an estimate of year 2004 EPS for the MacLog Company. In addition, a regression analysis indicates the following relationship between growth in sales per share for MacLog, and GDP growth is % $\Delta$ Sales per share = 0.015 + 0.75(% $\Delta$ GDP) -Refer to Exhibit 9.6. Estimate the firm's sales per share for the year 2020.

Expected earnings per share estimates requires all of the following EXCEPT

Which of the following economic series is NOT included in the Conference Board lagging indicator group?

Leading indicators of the business cycle include economic series that reach peaks or troughs before the peaks and troughs of the overall economy.

Under the present value of operating free cash flow technique, the firm's operating free cash flow to the firm is discounted at the firm's

Two major competitive strategies are low-cost leadership and low-price leadership.

In SWOT analysis, one examines all of the following factors, EXCEPT

It is more important to estimate future earnings than the future earnings multiplier.

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) The Rollerball Corporation's industry averages are as follows: Net Profit Margin = 7.5%; Total Asset Turnover = 2.2; Total Assets/Equity = 2.0 Rollerball Corporation has the following financial statements for year ending 12/31/2008. (000's omitted) -Refer to Exhibit 9.16. Calculate Rollerball Corporation's Total Asset Turnover.

There is a negative relationship between the capacity utilization rate and the profit margin.

It is important to analyze the economies and security markets before analyzing alternative industries or companies.

To benefit from cost leadership, a firm must command prices near the industry average.

It is reasonable to expect corporate sales to be closely related to GNP.