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

Unit labor costs, the rate of inflation, the level of foreign competition, and the capacity utilization rate were variables tested by Finkel and Tuttle as determinants of the

Returns from the overall market (or an individual stock) can be thought of as a combination of which of the following factors?

What is the implied growth duration of Howard Industries given the following?

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) Assume that the dividend payout ratio will be 65 percent when the rate on long-term government bonds falls to 8 percent. Because investors are becoming more risk averse, the equity risk premium will rise to 7 percent and investors will require a 15 percent return. The return on equity will be 12 percent. -Refer to Exhibit 9.1. To what price will the market rise if the earnings expectation is $22.00 per share?

An examination of the relationship between stock prices and the economy has shown that the relationship is

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) An analyst wishes to estimate the share price for Ashley Corporation. The following information is made available: Estimated profit margin = 15% Total asset turnover = 2 Financial leverage = 1.2 Estimated dividend payout ratio = 75% Required rate of return = 14% Estimated EPS = $2.50 -Refer to Exhibit 9.5. The firm's sustainable growth rate is

There are several techniques available to help an investor make a market decision. Which of the following is NOT such an analysis technique?

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 Net Profit Margin.

The dividend payout ratio, the required rate of return on common equity, and the expected growth rate of stock dividends are the major variables that affect

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) Assume that the dividend payout ratio will be 45 percent when the rate on long-term government bonds falls to 9 percent. Because investors are becoming more risk averse, the equity risk premium will rise to 7 percent and investors will require a 16 percent return. The return on equity will be 14 percent. -Refer to Exhibit 9.4. What is the expected sustainable growth rate?

Which of the following is NOT considered when looking at free cash flow to equity technique?

The constant growth dividend growth model is not appropriate for the valuation of growth companies.

The best known monetary variable is the level of taxes.

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) Modular Industries currently has a 16 percent annual growth rate, while the market average is 6 percent. The market multiple is 10. -Refer to Exhibit 9.11. Determine the P/E ratio for Modular Industries assuming Modular can maintain its superior growth rate for the next eight years.

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) -Refer to Exhibit 9.18. Based on the analyst's estimated return and the stocks' betas the analyst should

A defensive company is one whose sales, earnings, and cash flows are strongly correlated with the business cycle.

If, for the S&P Industrials Index, the profit margin was 0.35 and the equity turnover ratio was 10, the ROE would be

Which of the following is a management tenet of Warren Buffett?

Johnson Company just paid an annual dividend of $1.75. The next dividend will be paid one year from today. Johnson Company expects a constant growth of 5 percent in dividends forever. The required rate of return for this company's common stock is 13 percent. What is the value of one share of common stock?

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