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Syracuse University FIN 256 Ch.7 The dividend discount model should not be used to value stocks in which the dividend does not grow. False The liquidation value of a firm is equal to the book value of the firm. False According to the dividend discount model, a stock's price today depends on the investor's horizon for holding the stock. False ...[Show More]

Syracuse University
FIN 256
Ch.7

The dividend discount model should not be used to value stocks in which the dividend does not grow. False

The liquidation value of a firm is equal to the book value of the firm. False

According to the dividend discount model, a stock's price today depends on the investor's horizon for holding the stock. False

Technical analysts have no effect upon the efficiency of the stock market. False

If the stock prices follow a random walk, successive stock prices are not related False

In the calculation of rates of return on common stock, dividends are _ and capital gains are _. Not guaranteed

The book value of a firm's equity is determined by: the difference between book values of assets and liabilities.

If the liquidation value of a firm is negative, then: the firm's debt exceeds the market value of assets

Which of the following is least likely to account for an excess of market value over book value of equity? Inaccurate depreciation methods.

Firms with valuable intangible assets are more likely to show a(n):high going-concern value

How is it possible to ignore cash dividends that occur far into the future when using a dividend discount model? Those dividends: have an

insignificant present value.

Dividing a stock's earnings per share by the expected rate of return will value the share correctly if no new shares are issued and the dividend

yield: is zero

Which of the following situations accurately describes a growth stock, assuming that each firm has a required return of 12%? A firm with

investment opportunities yielding 15%

Other things equal, a firm's sustainable growth rate could increase as a result of: increasing the plowback ratio

In general, if a firm has positive present value of growth opportunities, then its price-earnings ratio: is greater than its required rate of return

Assuming all of the following firms have a required return of 14%, which would you expect to have a positive present value of growth

opportunities? A firm with a P/E ratio of 9

Which of the following is least likely to contribute to going concern value? High liquidation value

What happens to a firm that reinvests its earnings at a rate equal to the firm's required return? stock price remain constant.

What can be expected to happen when stocks having the same expected risk do not have the same expected return? At least one of the stocks

becomes temporarily mispriced.

Dividends that are expected to be paid far into the future have: lesser impact on current stock price due to discounting

Which of the following is more likely to be responsible for a firm having low PVGO? Payout is very high.

According to the constant dividend growth model, a stock price should equal the: sum of all discounted future dividends.

If The Wall Street Journal lists a stock's dividend as $1, then it is most likely the case that the stock: pays $0.25 quarterly, or an estimated $1

annually.

What is the minimum amount that shareholders should expect to receive in the event of a complete corporate liquidation? Zer