FIN 320 Week 7 Quiz

7/24/2019 FIN 320 Week 7 Quiz

http://slidepdf.com/reader/full/fin-320-week-7-quiz 1/54

FIN 320 Week 7 Quiz – Strayer

Click on the Link Below to Purchae !" #ra$e$ Coure %aterial

htt&'(()u$a&&*net(FIN+320+Week+7+Quiz+Strayer+3,-*ht.

Quiz / Cha&ter 2 an$ 3

Chapter 12: ___________________________________________________________________________

1. A top-down analysis of a firm's prospects starts with an analysis of the ____.

A. firm's position in its industry

B. U.S. economy or even the global economy

. industry

!. specific firm under consideration ". #n 1$%& the dollar-yen echange rate was about (.&&)*. #n "&1" the yen-dollar echange rate was about %&

yen per dollar. A +apanese producer would have had to increase the dollar price of a good sold in the UnitedStates by approimately _____ to maintain the same yen price in "&1".

A. 1,%

B. ,$.*

. "*.)

!. / /. An increase in the value of the yen against the U.S. dollar can cause the +apanese automa0er oyota to

either _____________ on its U.S. sales.

A. lose mar0et share or reduce its profit margin

B. gain mar0et share or reduce its profit margin

. lose mar0et share or increase its profit margin

!. gain mar0et share or increase its profit margin

http://budapp.net/FIN-320-Week-7-Quiz-Strayer-396.htm

http://budapp.net/FIN-320-Week-7-Quiz-Strayer-396.htm

7/24/2019 FIN 320 Week 7 Quiz


). 2ou estimate that the present value of a firm's cash flow is valued at (1* million. he brea0 up value of thefirm if you were to sell the ma3or assets and divisions separately would be ("& million. his is an eampleof what 4eter 5ynch would call ___________.

A. a stalwart

B. slow growth

. a star

!. an asset play *. Between 1$$$ and "&1&6 the purchasing power of the U.S. dollar increased relative to the purchasing power

of _______.

A. the United 7ingdom

B. the 8uro

. Swit9erland

!. anada . #f you believe the economy is about to go into a recession6 you might change your asset allocation by

selling _______ and buying ______.

A. growth stoc0s: long-term bonds

B. long-term bonds: growth stoc0s

. defensive stoc0s: growth stoc0s

!. defensive stoc0s: long-term bonds ,. he yield curve spread between the 1&-year -bond yield and the federal funds rate is a _______ economic

indicator.

A. leading

B. lagging

. coincident

!. mied

7/24/2019 FIN 320 Week 7 Quiz


%. he onference Board's onsumer onfidence #nde is released ______.

A. daily

B. wee0ly

. monthly

!. ;uarterly $. 2ou can earn abnormal returns on your investments via macro forecasting ______.

A. if you can forecast the economy at all

B. if you can forecast the economy as well as the average forecaster

. if you can forecast the economy better than the average forecaster

!. only if you can forecast the economy with perfect accuracy 1&. <hich of the following industries would most analysts classify as mature=

A. #nternet service providers

B. Biotechnology

. <ireless communication

!. Auto manufacturing 11. <hich one of the following stoc0s represents industries with below-average sensitivity to the state of the

economy=

A. >inancials

B. echnology

. >ood and beverage

!. yclicals

7/24/2019 FIN 320 Week 7 Quiz


1". he most widely used monetary policy tool is _________.

A. altering the discount rate

B. altering reserve re;uirements

. open mar0et operations

!. increasing the budget deficit 1/. <hich one of the following is the ratio of actual output from factories to potential output from factories=

A. apacity utili9ationrate

B. 4articipation rate

. !urable goods orders rate

!. #ndustrial production rate 1). According to __________ economists6 the growth of the U.S. economy in the 1$%&s can be attributed to

lower marginal ta rates6 which improved the incentives for people to wor0.

A. 7eynesian

B. monetarist

. supply-side

!. demand-side 1*. he mar0et value of all goods and services produced during a given time period is called ______.

A. ?!4

B. industrial production

. capacity utili9ation

!. factory orders

7/24/2019 FIN 320 Week 7 Quiz


1. A big increase in government spending is an eample of a _________.

A. positive demand shoc0

B. positive supply shoc0

. negative demand shoc0

!. negative supply shoc0 1,. ?!4 refers to _________.

A. the amount of personal disposable income in the economy

B. the difference between government spending and government revenues

. the total manufacturing output in the economy

!. the total production of goods and services in the economy 1%. 4ortfolio manager 4eter 5ynch would classify oca-ola as _________.

A. an asset play

B. a slow grower

. a stalwart

!. a turnaround 1$. Attempting to forecast future earnings and dividends is consistent with which of the following approaches

to securities analysis=

A. echnical analysis

B. >undamental analysis

. Both technical analysis and fundamental analysis

!. #ndeing

7/24/2019 FIN 320 Week 7 Quiz


"&. he analysis of the determinants of firm value is called _____________.

A. fundamental analysis

B. technical analysis

. momentum analysis

!. indeing "1. <hich of the following companies is the best eample of a turnaround=

A. oca-ola

B. @icrosoft

. 8on@obil

!. 7mart "". #nflation is caused by ________________.

A. unions

B. rapid growth of the money supply

. ecess supply

!. low rates of capacity utili9ation "/. 8verything else e;ual6 if you epect a larger interest rate increase than other mar0et participants6 you

should _________.

A. buy long-term bonds

B. buy short-term bonds

. buy common stoc0s

!. buy preferred stoc0s

7/24/2019 FIN 320 Week 7 Quiz


"). o obtain an approimate estimate of the real interest rate6 one must _________ the __________ thenominal ris0-free rate.

A. add: default premium to

B. subtract: default premium from

. add: epected inflation to

!. subtract: epected inflation from "*. <hich of the following would not be considered a supply shoc0=

A. A change in the price of imported oil

B. >rost damage to the orange crop

. A change in the level of education of the average wor0er

!. An increase in the level of government spending ". #f economic conditions are such that very slow growth is epected in the foreseeable future6 one would

want to invest in industries with __________ sensitivity to economic conditions.

A. below-average

B. average

. above-average

!. Since growth is epected to be slow6 sensitivity to economic conditions is not an issue. ",. <hich of the following is not an eample of fiscal policy=

A. Social Security spending

B. @edicare spending

. >ed purchases of reasury securities

!. hanges in the ta rate

7/24/2019 FIN 320 Week 7 Quiz


"%. Supply-side economics tends to focus on _______________.

A. government spending

B. price controls

. monetary policy

!. increasing productive capacity "$. <hich one of the following describes the amount by which government spending eceeds government

revenues=

A. Balance of trade

B. Budget deficit

. ?ross domestic product

!. utput gap /&. <hich one of the following is probably the most direct and immediate way to stimulate or slow the

economy6 although it is not very useful for fine-tuning economic performance=

A. >iscal policy

B. @onetary policy

. Supply-side policy

!. ising minimum wages /1. #n macroeconomic terms6 an increase in the price of imported oil or a decrease in the availability of oil is an

eample of a _________.

A. demand shoc0

B. supply shoc0

. monetary shoc0

!. refinery shoc0

7/24/2019 FIN 320 Week 7 Quiz


/". ______________ in interest rates are associated with stoc0 mar0et declines.

A. Anticipated increases

B. Unanticipated increases

. Anticipated decreases

!. Unanticipated decreases //. he average duration of unemployment is _________.

A. a leading economic indicator

B. a coincidental economic indicator

. a lagging economic indicator

!. both a coincidental indicator and a lagging indicator /). he ratio of the purchasing power of two economies is termed the _______.

A. balance of trade

B. real echange rate

. real interest rate

!. nominal echange rate /*. 8verything else e;ual6 an increase in the government budget deficit wouldC

#. #ncrease the government's demand for funds##. Shift the demand curve for funds to the left###. #ncrease the interest rate in the economy

A. ## only

B. # and ## only

. # and ### only

!. #6 ##6 and ###

7/24/2019 FIN 320 Week 7 Quiz


/. <hich of the following affects a firm's sensitivity of its earnings to the business cycle=

#. >inancial leverage##. perating leverage###. ype of product

A. ## only

B. # and ## only

. # and ### only

!. #6 ##6 and ### /,. <hich of the following describes the rate at which your ability to purchase grows while you hold an

interest-earning investment=

A. he nominal echange rate

B. he nominal interest rate

. he real echange rate

!. he real interest rate /%. An eample of a highly cyclical industry is the _________.

A. automobile industry

B. tobacco industry

. pharmaceutical industry

!. utility industry /$. he stoc0 price inde and contracts and orders for nondefense capital goods are _________.

A. leading economic indicators

B. coincidental economic indicators

. lagging economic indicators

!. leading and coincidental indicators6 respectively

7/24/2019 FIN 320 Week 7 Quiz


)&. <hich one of the following is not a demand shoc0=

A. #ncrease in government spending

B. #ncreases in the money supply

. eductions in consumer spending

!. #mprovements in education of U.S. wor0ers )1. <hich one of the following is not a U.S. supply shoc0=

A. Unions force an increase in national wage rates.

B. he oil supply from the @iddle 8ast drops /&.

. 8tended droughts reduce U.S. food production "*.

!. hinese purchases of U.S. eports increase. )". 4harmaceuticals6 food6 and other necessities would be good performers during the ____ stage of the

business cycle.

A. pea0

B. contraction

. trough

!. epansion )/. apital goods industries such as industrial e;uipment6 transportation6 and construction would be good

investments during the _____ stage of the business cycle.

A. pea0

B. contraction

. trough

!. epansion

7/24/2019 FIN 320 Week 7 Quiz


)). #f you are going to earn abnormal returns based on your macroeconomic analysis6 it will most li0ely have to be because __________.

A. you have more information than others

B. you are a better analyst than others

. you have the same information as others

!. you are an e;ually good analyst as others )*. #f the economy is going into a recession6 a good industry to invest in would be the __________ industry.

A. automobile

B. ban0ing

. construction

!. medical services ). @embers of the Board of ?overnors of the >ederal eserve System are appointed by ____________ to

serve _____________ terms.

A. the Senate: 1&-year

B. the Douse of epresentatives: %-year

. the 4resident: 1)-year

!. the Secretary of the reasury: -year ),. A firm in the early stages of its industry life cycle will li0ely have _________.

A. low dividend payout rates

B. low rates of investment

. low rates of return on investment

!. low E! spending

7/24/2019 FIN 320 Week 7 Quiz


)%. <hich of the following describes the percentage of the total labor force that has yet to find wor0=

A. he capacity utili9ation rate

B. he participation rate

. he unemployment rate

!. he natural rate )$. <hich of the following is the rate at which the general level of prices for goods and services is rising=

A. he echange rate

B. he gross domestic product growth rate

. he inflation rate

!. he real interest rate *&. An analyst starts by eamining the broad economic environment and then considers the implications of the

economy on the industry in which the firm operates. >inally6 the firm's position within the industry iseamined. his is called __________ analysis.

A. bottom-up

B. outside-inside

. top-down

!. upside-down *1. Assume that the >ederal eserve increases the money supply. his will causeC

#. #nterest rates to decrease##. onsumption and investment to decrease###. #nflation to fall

A. # only

B. # and ## only

. ## and ### only

!. #6 ##6 and ###

7/24/2019 FIN 320 Week 7 Quiz


*". he discount rate is the ________.

A. interest rate ban0s charge each other for overnight loans of deposits on reserve at the >ed

B. interest rate the >ed charges commercial ban0s on short-term loans

. interest rate that the U.S. reasury pays on its bills

!. interest rate that ban0s charge their best corporate customers */. #f the currency of your country is depreciating6 this should __________ eports and __________ imports.

A. stimulate: stimulate

B. stimulate: discourage

. discourage: stimulate

!. discourage: discourage *). #f interest rates increase6 business investment ependitures are li0ely to __________ and consumer durable

ependitures are li0ely to _________.

A. increase: increase

B. increase: decrease

. decrease: increase

!. decrease: decrease **. #ncreases in the money supply will cause demand for investment and consumption goods to __________ in

the short run and may cause prices to __________ in the long run.

A. increase: increase

B. increase: decrease

. decrease: increase

!. decrease: decrease

7/24/2019 FIN 320 Week 7 Quiz


*. he nominal interest rate is . he inflation rate is /. he eact real interest rate must be _________.

A. ".$1

B. /.%*

. 1.)*

!. ".1" *,. he nominal interest rate is 1&. he real interest rate is ). he inflation rate must be _________.

A. -

B. )

. *.,,

!. 1).) *%. rder the following stages in the industry life cycle from the earliest to latest to occur after the start-up

phaseC

#. @aturity##. elative decline###. onsolidation

A. ###6 #6 ##

B. #6 ###6 ##

. ###6 ##6 #

!. #6 ##6 ### *$. An investment strategy that entails shifting the portfolio into industry sectors that are epected to

outperform others based on macroeconomic forecasts is termed ______________.

A. sector rotation

B. contractionFepansion analysis

. life-cycle analysis

!. business-cycle shifting

7/24/2019 FIN 320 Week 7 Quiz


&. >irm A produces gadgets. he price of gadgets is (" each. >irm A has total fied costs of (16&&&6&&& andvariable costs of (1 per gadget. he corporate ta rate is )&. #f the economy is strong6 the firm will sell"6&&&6&&& gadgets. #f the economy enters a recession6 the firm will sell only half as many gadgets. #f theeconomy enters a recession6 the after-ta profit of firm A will be _________.

A. (&

B. ($&6&&&

. (1%&6&&&

!. (",&6&&& 1. >irm B produce gadgets. he price of gadgets is (" each. >irm B has total fied costs of (/&&6&&& and

variable costs of (1.)& per gadget. he corporate ta rate is /&. #f the economy is strong6 the firm will sell"6&&&6&&& gadgets. #f the economy enters a recession6 the firm will sell only half as many gadgets. #f theeconomy is strong6 the after-ta profit of firm B will be _________.

A. ($&6&&&

B. ("1&6&&&

. (/&&6&&&

!. (/&6&&& ". he fed funds rate is the __________.

A. interest rate that ban0s charge their best corporate customers

B. interest rate ban0s charge each other for overnight loans of deposits on reserve at the >ed

. interest rate the >ed charges commercial ban0s on short-term loans

!. interest rate that the U.S. reasury pays on its bills /. >irm B produce gadgets. he price of gadgets is (" each. >irm B has total fied costs of (/&&6&&& and

variable costs of (1.)& per gadget. he corporate ta rate is )&. <hat is the brea0even number of gadgets

B must sell to ma0e a 9ero after-ta profit=

A. /&&6&&&

B. )&&6&&&

. *&&6&&&

!. &&6&&&

7/24/2019 FIN 320 Week 7 Quiz


). he goal of supply-side policies is to _______.

A. increase government involvement in the economy

B. create an environment where wor0ers and owners of capital have the maimum incentive and ability to produce and develop goods

. maimi9e ta revenues of the government

!. focus more on wealth redistribution policies *. An industry analysis for manufacturers of a small personal care gadget observed the following

characteristicsC

1. #ndustry sales have grown at 1*-"& per year in recent years and are epected to grow at 1&-1* per year over the net / years6 still well above the economic growth rate.". Some U.S. manufacturers are attempting to enter fast-growing non-U.S. mar0ets6 which remain largelyuneploited.

/. Some manufacturers have created a new niche in the industry by selling directly to customers throughmail order. Sales for this industry segment are growing at )& per year.). he current penetration rate in the United States is & of households and will be difficult to increase.*. @anufacturers compete fiercely on the basis of price6 and price wars within the industry are common.. Some manufacturers are able to develop new6 uneploited niche mar0ets in the United States based oncompany reputation6 ;uality6 and service.,. Several manufacturers have recently merged6 and it is epected that consolidation in the industry willincrease.%. Gew manufacturers continue to enter the mar0et.

haracteristics ) and * would indicate that the industry is in the _________ stage.

A. start-up

B. consolidation

. maturity

!. relative decline

7/24/2019 FIN 320 Week 7 Quiz


. An industry analysis for manufacturers of a small personal care gadget observed the followingcharacteristicsC

1. #ndustry sales have grown at 1*-"& per year in recent years and are epected to grow at 1&-1* per year over the net / years6 still well above the economic growth rate.". Some U.S. manufacturers are attempting to enter fast-growing non-U.S. mar0ets6 which remain largelyuneploited./. Some manufacturers have created a new niche in the industry by selling directly to customers through

mail order. Sales for this industry segment are growing at )& per year.). he current penetration rate in the United States is & of households and will be difficult to increase.*. @anufacturers compete fiercely on the basis of price6 and price wars within the industry are common.. Some manufacturers are able to develop new6 uneploited niche mar0ets in the United States based oncompany reputation6 ;uality6 and service.,. Several manufacturers have recently merged6 and it is epected that consolidation in the industry willincrease.%. Gew manufacturers continue to enter the mar0et.

haracteristics _______ would be typical of an industry that is in the start-up stage.

A. ) and ,

B. 1 and )

. " and *

!. none of these options

7/24/2019 FIN 320 Week 7 Quiz


,. An industry analysis for manufacturers of a small personal care gadget observed the followingcharacteristicsC



haracteristics ____ would be typical of an industry that is in the consolidation stage.

A. and ,

B. 1 and )

. * and

!. " and %

7/24/2019 FIN 320 Week 7 Quiz


%. An industry analysis for manufacturers of a small personal care gadget observed the followingcharacteristicsC



<hich of the characteristics would be typical of an industry that is in the maturity stage=

A. 16 "6 and /

B. ) and *

. 6 ,6 and %

!. all of these options $. ountercyclical fiscal policy is best described by which of the following statements=

A. ?overnment surpluses are planned during economic booms6 and deficits are planned during economicrecessions.

B. he annual budget should always be balanced.

. !eficits should always e;ual surpluses.

!. ?overnment deficits are planned during economic booms6 and surpluses are planned during economicrecessions.

,&. A supply-side economist would li0ely agree with which of the following statements=

A. eal output and aggregate employment are primarily determined by aggregate demand.

B. eal income will rise when government ependitures and ta rates increase.

. eal output and aggregate employment are primarily determined by ta rates.

!. #ncreasing the money supply will increase real output without causing higher inflation.

7/24/2019 FIN 320 Week 7 Quiz


,1. <hich of the following actions should the central ban0 ta0e if monetary authorities want to reduce thesupply of money to slow the rate of inflation=

A. Sell government bonds6 reducing money supply6 increasing interest rates6 and slowing aggregatedemand.

B. Buy government bonds6 reducing money supply6 increasing interest rates6 and slowing aggregate

demand.

. !ecrease the discount rate6 lowering interest rates and causing both costs and prices to fall.

!. #ncrease taes6 reducing costs and causing prices to fall. ,". he decline in the value of the dollar relative to the yen will have what impact on the purchase of U.S.

goods in +apan=

A. U.S. goods will increase in cost6 and +apan will import more.

B. U.S. goods will increase in cost6 and +apan will import less.

. U.S. goods will decrease in cost6 and +apan will import more.

!. U.S. goods will increase in cost6 and +apan will eport less. ,/. <hich of the following are eamples of cyclical industries=

#. @aytag##. omputer chip manufacturers

###. 7ellogg's >rosted >la0es#H. 4fi9er

A. # and ## only

B. #6 ##6 and ### only

. ##6 ###6 and #H only

!. #6 ##6 ###6 and #H

7/24/2019 FIN 320 Week 7 Quiz


,). 2ou would epect the beta of cyclical industries to be ______ and the beta of defensive industries to be ______.

A. greater than 1: less than 1

B. less than 1: less than 1

. less than 1: greater than 1

!. greater than 1: greater than 1 ,*. <hat economic variable is most closely associated with increasing corporate profits=

A. 8change rates

B. #nflation

. ?ross domestic product

!. Budget deficits ,. he federal government decides to pay for the transition to private social security accounts with a one-time

(1 trillion bond issue. <hat will be the biggest concern to businesses relative to the Icrowding outI effect=

A. Digher interest rates due to the new government borrowing

B. #nflation resulting from more government purchases

. A negative supply shoc0

!. Shortage of investment due to new accounts ,,. An epanding economy re;uires more wor0ers. #f the supply of wor0ers becomes inade;uate to meet the

demand6 what is the li0ely impact on the economy=

A. An economic slowdown is li0ely

B. 8mployment trends will reverse and unemployment will occur

. ?overnment deficits will result from capacity utili9ation

!. #nflation may result from upward wage pressures

7/24/2019 FIN 320 Week 7 Quiz


,%. An epanding economy puts stress on the manufacturing ability of a company. <hen a firm turns businessdown during periods of economic epansion6 a problem eists in the area of ____________.

A. asset allocation

B. capacity utili9ation

. employment management

!. strategic planning ,$. he epansion of the money supply at a rate that eceeds the increase in goods and services will li0ely

result in ___________.

A. epanding economy

B. increased inflation

. interest rate declines

!. lower ?!4 %&. he supply of funds in the economy is controlled primarily by ____________.

A. the >ederal eserve System

B. ongress

. money center ban0s

!. the reasury department %1. he classification system used to classify firms into industries is now called the _____ code.

A. S#

B. GA#S

. #S *,

!. #S@

7/24/2019 FIN 320 Week 7 Quiz


%". !uring "&&) hina increased its use of global oil by )&. his followed a 1&& increase during the previous * years. Dow do economists refer to this 0ind of economic event=

A. !emand shoc0

B. 8;uilibrium event

. 8panding commodity event

!. Supply shoc0 %/. <henever 48 attempts to influence the price of oil by significantly altering production6 economists refer

to this type of event as a ______________.

A. demand shoc0

B. e;uilibrium event

. epanding commodity event

!. supply shoc0 %). #tems that are ____________ and product purchases for which ________ is not important tend to be less

cyclical in nature.

A. necessities: income

B. luuries: leverage

. discretionary goods: time of purchase

!. produced with high fied costs: entertainment %*. ash cows are typically found in the _________ stage of the industry life cycle.

A. start-up

B. consolidation

. maturity

!. relative decline

7/24/2019 FIN 320 Week 7 Quiz


%. At what point in the industry life cycle are inefficiencies in competitors most li0ely to be removed=

A. Start-up stage

B. onsolidation stage

. @aturity stage

!. elative decline stage %,. Stalwarts are typically found in the _________ stage of the industry life cycle.

A. start-up

B. consolidation

. maturity

!. relative decline %%. 5arge-growth companies generally emerge in the __________ stage.

A. start-up

B. consolidation

. maturity

!. relative decline %$. <hich of the following are barriers to entry=

#. 5arge economies of scale re;uired to be profitable##. 8stablished brand loyalty###. 4atent protection for the firm's product#H. apid industry growth

A. # and ## only

B. #6 ##6 and ### only

. ##6 ###6 and #H only

!. ### and #H only

7/24/2019 FIN 320 Week 7 Quiz


Chapter 13:

_____________________________________________________________________ ______

1. he accounting measure of a firm's e;uity value generated by applying accounting principles to asset and liability ac;uisitions is called ________.

A. boo0 value

B. mar0et value

. li;uidation value

!. obin's q ". he price-to-sales ratio is probably most useful for firms in which phase of the

industry life cycle=

A. Start-up phase

B. onsolidation

. @aturity

!. elative decline /. #f a firm increases its plowbac0 ratio6 this will probably result in _______ 4F8

ratio.

A. a higher

B. a lower

. an unchanged

!. he answer cannot be determined from the information given.

7/24/2019 FIN 320 Week 7 Quiz


). he value of #nternet companies is based primarily on _____.

A. current profits

B. obin's q

. growth opportunities

!. replacement cost *. Gew-economy companies generally have higher _______ than old-economy

companies.

A. boo0 value per share

B. 4F8 multiples

. profits

!. asset values . 4F8 ratios tend to be _______ when inflation is ______.

A. higher: higher

B. lower: lower

. higher: lower

!. hey are unrelated. ,. <hich one of the following statements about mar0et and boo0 value is correct=

A. All firms sell at a mar0et-to-boo0 ratio above 1.

B. All firms sell at a mar0et-to-boo0 ratio greater than or e;ual to 1.

. All firms sell at a mar0et-to-boo0 ratio below 1.

!. @ost firms have a mar0et-to-boo0 ratio above 16 but not all.

7/24/2019 FIN 320 Week 7 Quiz


%. 8arnings yields tend to _______ when reasury yields fall.

A. fall

B. rise

. remain unchanged

!. fluctuate wildly $. <hich one of the following is a common term for the mar0et consensus value of

the re;uired return on a stoc0=

A. !ividend payout ratio

B. #ntrinsic value

. @ar0et capitali9ation rate

!. 4lowbac0 ratio 1&. <hich one of the following is e;ual to the ratio of common shareholders' e;uity to

common shares outstanding=

A. Boo0 value per share

B. 5i;uidation value per share

. @ar0et value per share

!. obin's q 11. A firm has current assets that could be sold for their boo0 value of (1& million.

he boo0 value of its fied assets is (& million6 but they could be sold for ($*

million today. he firm has total debt at a boo0 value of ()& million6 but interestrate changes have increased the value of the debt to a current mar0et value of (*&million. his firm's mar0et-to-boo0 ratio is ________.

A. 1.%/

B. 1.*

. 1./*

!. 1.)

7/24/2019 FIN 320 Week 7 Quiz


1". #f a stoc0 is correctly priced6 then you 0now that ____________.

A. the dividend payout ratio is optimal

B. the stoc0's re;uired return is e;ual to the growth rate in earnings and dividends

. the sum of the stoc0's epected capital gain and dividend yield is e;ual to thestoc0's re;uired rate of return

!. the present value of growth opportunities is e;ual to the value of assets in place 1/. A stoc0 has an intrinsic value of (1* and an actual stoc0 price of (1/.*&. 2ou

0now that this stoc0 ________.

A. has a obin's q value J 1

B. will generate a positive alpha

. has an epected return less than its re;uired return

!. has a beta K 1 1). Bill6 +im6 and Shelly are all interested in buying the same stoc0 that pays

dividends. Bill plans on holding the stoc0 for 1 year. +im plans on holding thestoc0 for / years. Shelly plans on holding the stoc0 until she retires in 1& years.<hich one of the following statements is correct=

A. Bill will be willing to pay the most for the stoc0 because he will get his money bac0 in 1 year when he sells.

B. +im should be willing to pay three times as much for the stoc0 as Bill will pay because his epected holding period is three times as long as Bill's.

. Shelly should be willing to pay the most for the stoc0 because she will hold it

the longest and hence will get the most dividends.

!. All three should be willing to pay the same amount for the stoc0 regardless oftheir holding period.

7/24/2019 FIN 320 Week 7 Quiz


1*. A firm that has an 8 of 1" is considering cutting its dividend payout. hestoc0holders of the firm desire a dividend yield of ) and a capital gain yield of$. ?iven this information6 which of the following statements is LareM correct=

#. All else e;ual6 the firm's growth rate will accelerate after the payout change.

##. All else e;ual6 the firm's stoc0 price will go up after the payout change.###. All else e;ual6 the firm's 4F8 ratio will increase after the payout change.

A. # only

B. # and ## only

. ## and ### only

!. #6 ##6 and ###

1. A firm cuts its dividend payout ratio. As a result6 you 0now that the firm's

_______.

A. return on assets will increase

B. earnings retention ratio will increase

. earnings growth rate will fall

!. stoc0 price will fall 1,.__________ is the amount of money per common share that could be reali9ed by

brea0ing up the firm6 selling its assets6 repaying its debt6 and distributing theremainder to shareholders.

A. Boo0 value per share

B. 5i;uidation value per share

. @ar0et value per share

!. obin's q

7/24/2019 FIN 320 Week 7 Quiz


1%.An underpriced stoc0 provides an epected return that is ____________ there;uired return based on the capital asset pricing model LA4@M.

A. less than

B. e;ual to

. greater than

!. greater than or e;ual to 1$. Stoc0holders of !ogs Us 4et Supply epect a 1" rate of return on their stoc0.

@anagement has consistently been generating an 8 of 1* over the last *years but now believes that 8 will be 1" for the net * years. ?iven this6 thefirm's optimal dividend payout ratio is now ______.

A. &

B. 1&&

. between & and *&

!. between *& and 1&& "&.he constant-growth dividend discount model L!!@M can be used only when the

___________.

A. growth rate is less than or e;ual to the re;uired return

B. growth rate is greater than or e;ual to the re;uired return

. growth rate is less than the re;uired return

!. growth rate is greater than the re;uired return

7/24/2019 FIN 320 Week 7 Quiz


"1.Suppose that in "&1" the epected dividends of the stoc0s in a broad mar0et indee;ualed (")& million when the discount rate was % and the epected growth rateof the dividends e;ualed . Using the constant-growth formula for valuation6 ifinterest rates increase to $6 the value of the mar0et will change by _____.

A. -1&

B. -"&

. -"*

!. -// "". 2ou want to earn a return of 1& on each of two stoc0s6 A and B. 8ach of the

stoc0s is epected to pay a dividend of () in the upcoming year. he epected

growth rate of dividends is for stoc0 A and * for stoc0 B. Using the constant-growth !!@6 the intrinsic value of stoc0 A _________.

A. will be higher than the intrinsic value of stoc0 B

B. will be the same as the intrinsic value of stoc0 B

. will be less than the intrinsic value of stoc0 B

!. he answer cannot be determined from the information given. "/. 8ach of two stoc0s6 A and B6 is epected to pay a dividend of (, in the upcoming

year. he epected growth rate of dividends is for both stoc0s. 2ou re;uire areturn of 1& on stoc0 A and a return of 1" on stoc0 B. Using the constant-growth !!@6 the intrinsic value of stoc0 A _________.




!. he answer cannot be determined from the information given.

7/24/2019 FIN 320 Week 7 Quiz


"). 2ou want to earn a return of 11 on each of two stoc0s6 A and B. Stoc0 A isepected to pay a dividend of (/ in the upcoming year6 while stoc0 B is epectedto pay a dividend of (" in the upcoming year. he epected growth rate ofdividends for both stoc0s is ). Using the constant-growth !!@6 the intrinsicvalue of stoc0 A _________.




!. he answer cannot be determined from the information given. "*. 2ou are considering ac;uiring a common share of Sahali Shopping enter

orporation that you would li0e to hold for 1 year. 2ou epect to receive both(1."* in dividends and (/* from the sale of the share at the end of the year. hemaimum price you would pay for a share today is __________ if you wanted toearn a 1" return.

A. (/1."*

B. (/"./,

. (/%.),

!. ()1./" ". he mar0et capitali9ation rate on the stoc0 of Aberdeen <holesale ompany is

1&. #ts epected 8 is 1"6 and its epected 84S is (*. #f the firm's plowbac0ratio is *&6 its 4F8 ratio will be _________.

A. %.//

B. 1".*

. 1$."/

!. ").1*

7/24/2019 FIN 320 Week 7 Quiz


",. he mar0et capitali9ation rate on the stoc0 of Aberdeen <holesale ompany is1&. #ts epected 8 is 1"6 and its epected 84S is (*. #f the firm's plowbac0ratio is &6 its 4F8 ratio will be _________.

A. ,.1)

B. 1)."$

. 1.,

!. ""."" "%. <eyerhaeuser #ncorporated has a balance sheet that lists (,& million in assets6 ()*

million in liabilities6 and ("* million in common shareholders' e;uity. #t has 1million common shares outstanding. he replacement cost of its assets is (%*

million. #ts share price in the mar0et is ()$. #ts boo0 value per share is _________.

A. (1.,

B. ("*

. (/,.*&

!. ()&.%/ "$. 8agle Brand Arrowheads has epected earnings of (1."* per share and a mar0et

capitali9ation rate of 1". 8arnings are epected to grow at * per yearindefinitely. he firm has a )& plowbac0 ratio. By how much does the firm's8 eceed the mar0et capitali9ation rate=

A. .*

B. 1

. 1.*

!. "

7/24/2019 FIN 320 Week 7 Quiz


/&. ?agliardi <ay orporation has an epected 8 of 1*. #f it pays out /& of itsearnings as dividends6 its dividend growth rate will be _____.

A. ).*

B. 1&.*

. 1*

!. /& /1. A preferred share of o;uihalla orporation will pay a dividend of (% in the

upcoming year and every year thereafter: that is6 dividends are not epected togrow. 2ou re;uire a return of , on this stoc0. Using the constant-growth !!@ tocalculate the intrinsic value6 a preferred share of o;uihalla orporation is worth

_________.

A. (1/.*&

B. ()*.*&

. ($1

!. (11)."$ /". Brevi0 Builders has an epected 8 of "*. #ts dividend growth rate will be

__________ if it follows a policy of paying /& of earnings in the form ofdividends.

A. *

B. 1*

. 1,.*

!. )*

7/24/2019 FIN 320 Week 7 Quiz


//. A firm is planning on paying its first dividend of (" three years from today. Afterthat6 dividends are epected to grow at per year indefinitely. he stoc0'sre;uired return is 1). <hat is the intrinsic value of a share today=

A. ("*

B. (1.%,

. (1$.")

!. ("&.$$ /). ose Dill rading ompany is epected to have 84S in the upcoming year of (%.

he epected 8 is 1%. An appropriate re;uired return on the stoc0 is 1). #fthe firm has a plowbac0 ratio of ,&6 its dividend in the upcoming year should be

_________.

A. (1.1"

B. (1.))

. (".)&

!. (*.& /*. ose Dill rading ompany is epected to have 84S in the upcoming year of (.

he epected 8 is 1%. An appropriate re;uired return on the stoc0 is 1). #fthe firm has a plowbac0 ratio of ,&6 its intrinsic value should be _________.

A. ("&.$/

B. ($.,,

. (1"%.*,

!. (1*&

7/24/2019 FIN 320 Week 7 Quiz


/.ache ree0 @anufacturing ompany is epected to pay a dividend of (/./ inthe upcoming year. !ividends are epected to grow at % per year. he ris0-freerate of return is )6 and the epected return on the mar0et portfolio is 1).#nvestors use the A4@ to compute the mar0et capitali9ation rate and use theconstant-growth !!@ to determine the value of the stoc0. he stoc0's current

price is (%). Using the constant-growth !!@6 the mar0et capitali9ation rate is _________.

A. $

B. 1"

. 1)

!. 1%

/,. ?rott and 4errin6 #nc.6 has epected earnings of (/ per share for net year. he

firm's 8 is "&6 and its earnings retention ratio is ,&. #f the firm's mar0etcapitali9ation rate is 1*6 what is the present value of its growth opportunities=

A. ("&

B. (,&

. ($&

!. (11* /%. Ace Hentura6 #nc.6 has epected earnings of (* per share for net year. he firm's

8 is 1*6 and its earnings retention ratio is )&. #f the firm's mar0etcapitali9ation rate is 1&6 what is the present value of its growth opportunities=

A. ("*

B. (*&

. (,*

!. (1&&

7/24/2019 FIN 320 Week 7 Quiz


/$. Annie's !onut Shops6 #nc.6 has epected earnings of (/ per share for net year.he firm's 8 is 1%6 and its earnings retention ratio is &. #f the firm's mar0etcapitali9ation rate is 1"6 what is the value of the firm ecluding any growthopportunities=

A. ("*

B. (*&

. (%/.//

!. ("&% )&. >landers6 #nc.6 has epected earnings of () per share for net year. he firm's 8

is %6 and its earnings retention ratio is )&. #f the firm's mar0et capitali9ation

rate is 1*6 what is the present value of its growth opportunities=

A. -(.//

B. (&

. ("&./)

!. ("., )1. >irm A is high-ris06 and >irm B is low-ris0. 8verything else e;ual6 which firm

would you epect to have a higher 4F8 ratio=

A. >irm A

B. >irm B

. Both would have the same 4F8 if they were in the same industry.

!. here is not necessarily any lin0age between ris0 and 4F8 ratios.

7/24/2019 FIN 320 Week 7 Quiz


)". >irms with higher epected growth rates tend to have 4F8 ratios that are ___________ the 4F8 ratios of firms with lower epected growth rates.

A. higher than

B. e;ual to

. lower than

!. here is not necessarily any lin0age between ris0 and 4F8 ratios. )/. Halue stoc0s are more li0ely to have a 48? ratio _____.

A. less than 1

B. e;ual to 1

. greater than 1

!. less than 9ero )).?enerally spea0ing6 as a firm progresses through the industry life cycle6 you

would epect the 4H? to ________ as a percentage of share price.

A. increase

B. decrease

. stay the same

!. Go typical pattern can be epected.

7/24/2019 FIN 320 Week 7 Quiz


)*.ache ree0 @anufacturing ompany is epected to pay a dividend of ()."& inthe upcoming year. !ividends are epected to grow at the rate of % per year. heris0-free rate of return is )6 and the epected return on the mar0et portfolio is1). #nvestors use the A4@ to compute the mar0et capitali9ation rate on thestoc0 and use the constant-growth !!@ to determine the intrinsic value of the

stoc0. he stoc0 is trading in the mar0et today at (%). Using the constant-growth!!@ and the A4@6 the beta of the stoc0 is _________.

A. 1.)

B. .$

. .%

!. .*

). <estsyde ool ompany is epected to pay a dividend of (1.*& in the upcoming

year. he ris0-free rate of return is 6 and the epected return on the mar0et portfolio is 1). Analysts epect the price of <estsyde ool ompany shares to be ("$ a year from now. he beta of <estsyde ool ompany's stoc0 is 1.". Usingthe A4@6 an appropriate re;uired return on <estsyde ool ompany's stoc0 is

_________.

A. %

B. 1&.%

. 1*.

!. 1.% ),. <estsyde ool ompany is epected to pay a dividend of (" in the upcoming year.

he ris0-free rate of return is 6 and the epected return on the mar0et portfoliois 1". Analysts epect the price of <estsyde ool ompany shares to be ("$ ayear from now. he beta of <estsyde ool ompany's stoc0 is 1.". Using a one-

period valuation model6 the intrinsic value of <estsyde ool ompany stoc0 todayis _________.

A. (")."$

B. (",./$

. (/1.1/

!. (/).*"

7/24/2019 FIN 320 Week 7 Quiz


)%. odd @ountain !evelopment orporation is epected to pay a dividend of (".*&in the upcoming year. !ividends are epected to grow at the rate of % per year.he ris0-free rate of return is *6 and the epected return on the mar0et portfoliois 1". he stoc0 of odd @ountain !evelopment orporation has a beta of .,*.Using the A4@6 the return you should re;uire on the stoc0 is _________.

A. ,."*

B. 1&."*

. 1).,*

!. "1 )$. odd @ountain !evelopment orporation is epected to pay a dividend of (/ in

the upcoming year. !ividends are epected to grow at the rate of % per year. heris0-free rate of return is *6 and the epected return on the mar0et portfolio is1,. he stoc0 of odd @ountain !evelopment orporation has a beta of .,*.Using the constant-growth !!@6 the intrinsic value of the stoc0 is _________.

A. )

B. 1,.*

. /,.*&

!. *& *&.?enerally spea0ing6 the higher a firm's A6 the _________ the dividend payout

ratio and the _________ the firm's growth rate of earnings.

A. higher: lower

B. higher: higher

. lower: lower

!. lower: higher

7/24/2019 FIN 320 Week 7 Quiz


*1. #nterior Airline is epected to pay a dividend of (/ in the upcoming year.!ividends are epected to grow at the rate of 1& per year. he ris0-free rate ofreturn is )6 and the epected return on the mar0et portfolio is 1/. he stoc0 of#nterior Airline has a beta of ). Using the constant-growth !!@6 the intrinsicvalue of the stoc0 is _________.

A. (1&

B. ("".,/

. (",.,%

!. ()1., *". aribou ?old @ining orporation is epected to pay a dividend of () in the

upcoming year. !ividends are epected to decline at the rate of / per year. heris0-free rate of return is *6 and the epected return on the mar0et portfolio is1/. he stoc0 of aribou ?old @ining orporation has a beta of .*. Using theA4@6 the return you should re;uire on the stoc0 is _________.

A. "

B. *

. %

!. $ */. aribou ?old @ining orporation is epected to pay a dividend of ( in the

upcoming year. !ividends are epected to decline at the rate of / per year. heris0-free rate of return is *6 and the epected return on the mar0et portfolio is1/. he stoc0 of aribou ?old @ining orporation has a beta of .*. Using theconstant-growth !!@6 the intrinsic value of the stoc0 is _________.

A. (*&

B. (1&&

. (1*&

!. ("&&

7/24/2019 FIN 320 Week 7 Quiz


*). 5ifecycle @otorcycle ompany is epected to pay a dividend in year 1 of ("6 adividend in year " of (/6 and a dividend in year / of (). After year /6 dividends areepected to grow at the rate of , per year. An appropriate re;uired return for thestoc0 is 1". Using the multistage !!@6 the stoc0 should be worth __________today.

A. (/.%&

B. (*.1/

. (,.$*

!. (%*.& **.Ace >risbee orporation produces a good that is very mature in the firm's product

life cycles. Ace >risbee orporation is epected to pay a dividend in year 1 of (/6a dividend in year " of ("6 and a dividend in year / of (1. After year /6 dividendsare epected to decline at the rate of " per year. An appropriate re;uired returnfor the stoc0 is %. Using the multistage !!@6 the stoc0 should be worth

__________ today.

A. (1/.&,

B. (1/.*%

. (1%."*

!. (1%.,% *. A firm's earnings per share increased from (1& to (1"6 its dividends increased

from () to ().)&6 and its share price increased from (%& to (1&&. ?iven thisinformation6 it follows that _________.

A. the stoc0 eperienced a drop in its 4F8 ratio

B. the company had a decrease in its dividend payout ratio

. both earnings and share price increased by "&

!. the re;uired rate of return increased

7/24/2019 FIN 320 Week 7 Quiz


*,. Assuming all other factors remain unchanged6 __________ would increase a firm's price-earnings ratio.

A. an increase in the dividend payout ratio

B. a reduction in investor ris0 aversion

. an epected increase in the level of inflation

!. an increase in the yield on reasury bills *%. A company with an epected earnings growth rate which is greater than that of the

typical company in the same industry most li0ely has _________________.

A. a dividend yield which is greater than that of the typical company

B. a dividend yield which is less than that of the typical company

. less ris0 than the typical company

!. less sensitivity to mar0et trends than the typical company *$.8verything else e;ual6 which variable is negatively related to the intrinsic value of

a company=

A. D1

B. D&

. g

!. k

&.Sanders6 #nc.6 paid a () dividend per share last year and is epected to continue to

pay out & of its earnings as dividends for the foreseeable future. #f the firm isepected to generate a 1/ return on e;uity in the future6 and if you re;uire a 1*return on the stoc06 the value of the stoc0 is _________.

A. (".,

B. (/*.1$

. ()".$)

!. (*$.%$

7/24/2019 FIN 320 Week 7 Quiz


1. A firm has 4H? of & and a mar0et capitali9ation rate of 1". <hat is the firm's4F8 ratio=

A. 1"

B. %.//

. 1&."*

!. 1%.** ". A firm has an earnings retention ratio of )&. he stoc0 has a mar0et

capitali9ation rate of 1* and an 8 of 1%. <hat is the stoc0's 4F8 ratio=

A. 1".%"

B. ,.$

. %.//

!. $.) /. A common stoc0 pays an annual dividend per share of (1.%&. he ris0-free rate is

*6 and the ris0 premium for this stoc0 is ). #f the annual dividend is epectedto remain at (1.%& per share6 what is the value of the stoc0=

A. (1,.,%

B. ("&

. ()&

!. Gone of these options

7/24/2019 FIN 320 Week 7 Quiz


). ransportation stoc0s currently provide an epected rate of return of 1*. 6 alarge transportation company6 will pay a year-end dividend of (/ per share. #f thestoc0 is selling at (& per share6 what must be the mar0et's epectation of theconstant-growth rate of dividends=

A. *

B. 1&

. "&

!. Gone of these options *. A stoc0 is priced at ()* per share. he stoc0 has earnings per share of (/ and a

mar0et capitali9ation rate of 1). <hat is the stoc0's 4H?=

A. ("/.*,

B. (1*

. (1$.,%

!. ("1./) . A firm increases its dividend plowbac0 ratio. All else e;ual6 you 0now that

_____________.

A. earnings growth will increase and the stoc0's 4F8 will increase

B. earnings growth will decrease and the stoc0's 4F8 will increase

. earnings growth will increase and the stoc0's 4F8 will decrease

!. earnings growth will increase and the stoc0's 4F8 may or may not increase

7/24/2019 FIN 320 Week 7 Quiz


,. A firm has a stoc0 price of (*).,* per share. he firm's earnings are (,* million6and the firm has "& million shares outstanding. he firm has an 8 of 1* and a

plowbac0 of *. <hat is the firm's 48? ratio=

A. 1.*

B. 1."*

. 1.1

!. 1 %. A has come out with a new and improved product. As a result6 the firm pro3ects

an 8 of "*6 and it will maintain a plowbac0 ratio of ."&. #ts earnings this yearwill be (/ per share. #nvestors epect a 1" rate of return on the stoc0.

At what price would you epect A to sell=

A. ("*

B. (/)."$

. ()".%

!. ()*., $. A has come out with a new and improved product. As a result6 the firm pro3ects


At what 4F8 ratio would you epect A to sell=

A. %.//

B. 11.)/

. 1)."$

!. 1*."*

7/24/2019 FIN 320 Week 7 Quiz


,&. A has come out with a new and improved product. As a result6 the firm pro3ectsan 8 of "*6 and it will maintain a plowbac0 ratio of ."&. #ts earnings this yearwill be (/ per share. #nvestors epect a 1" rate of return on the stoc0.

<hat is the present value of growth opportunities for A=

A. (%.*,

B. ($."$

. (1)."$

!. (1."$ ,1. A has come out with a new and improved product. As a result6 the firm pro3ects


<hat price do you epect A shares to sell for in ) years=

A. (*/.$

B. ()).$*

. ()1.%

!. (/$., ,". he 8B# of a firm is (/&&6 the ta rate is /*6 the depreciation is ("&6 capital

ependitures are (&6 and the increase in net wor0ing capital is (/&. <hat is thefree cash flow to the firm=

A. (%*

B. (1"*

. (1%*

!. (/&*

7/24/2019 FIN 320 Week 7 Quiz


,/. A firm reports 8B# of (1&& million. he income statement shows depreciation of("& million. #f the ta rate is /* and total capital ependitures and increases inwor0ing capital total (1& million6 what is the free cash flow to the firm=

A. (*,

B. (*

. (,*

!. ($* ,). he free cash flow to the firm is (/&& million in perpetuity6 the cost of e;uity

e;uals 1)6 and the <A is 1&. #f the mar0et value of the debt is (1 billion6what is the value of the e;uity using the free cash flow valuation approach=

A. (1 billion

B. (" billion

. (/ billion

!. () billion ,*. #f a firm has a free cash flow e;ual to (*& million and that cash flow is epected to

grow at / forever6 what is the total firm value given a <A of $.*=

A. (,$.%1 million

B. (,1*.*) million

. (,$."/ million

!. (%&/.&/ million

7/24/2019 FIN 320 Week 7 Quiz


,. he free cash flow to the firm is reported as ()&* million. he interest epense tothe firm is (, million. #f the ta rate is /* and the net debt of the firm increased

by (*& million6 what is the free cash flow to the e;uity holders of the firm=

A. ()&*. million

B. ()*)." million

. (*&*.% million

!. (**/.* million ,,. he free cash flow to the firm is reported as (",* million. he interest epense to

the firm is (& million. #f the ta rate is /* and the net debt of the firm increased by (// million6 what is the free cash flow to the e;uity holders of the firm=

A. ("$ million

B. ("$ million

. (/&* million

!. (/", million ,%. he free cash flow to the firm is reported as ("&* million. he interest epense to

the firm is ("" million. #f the ta rate is /* and the net debt of the firm increased by ("* million6 what is the approimate mar0et value of the firm if the >>8grows at " and the cost of e;uity is 11=

A. ("61% billion

B. ("6))* billion

. ("6** billion

!. ("6$$% billion

7/24/2019 FIN 320 Week 7 Quiz


,$. he free cash flow to the firm is reported as (1$% million. he interest epense tothe firm is (1* million. #f the ta rate is /* and the net debt of the firm increased

by ("& million6 what is the approimate mar0et value of the firm if the >>8grows at / and the cost of e;uity is 1)=

A. (16$*& billion

B. ("6)$, billion

. ("6*%* billion

!. (/6&$% billion %&. >irm A has a stoc0 price of (/*6 and & of the value of the stoc0 is in the form of

4H?. >irm B also has a stoc0 price of (/*6 but only "& of the value of stoc0 B

is in the form of 4H?. <e 0now thatC

#. Stoc0 A will give us a higher return than Stoc0 B.##. An investment in stoc0 A is probably ris0ier than an investment in stoc0 B.###. Stoc0 A has higher forecast earnings growth than stoc0 B.

A. # only

B. # and ## only

. ## and ### only

!. #6 ##6 and ### %1.A firm is epected to produce earnings net year of (/ per share. #t plans to

reinvest "* of its earnings at "&. #f the cost of e;uity is 116 what should bethe value of the stoc0=

A. (",.",

B. (/,.*&

. (.,

!. (,&

7/24/2019 FIN 320 Week 7 Quiz


%". Get year's earnings are estimated to be (*. he company plans to reinvest "& of its earnings at 1*. #f the cost of e;uity is $6 what is the present value of growthopportunities=

A. ($.&$

B. (1&.1&

. (11.11

!. (1"."1 %/. Get year's earnings are estimated to be (. he company plans to reinvest // of

its earnings at 1". #f the cost of e;uity is %6 what is the present value of growthopportunities=

A. (

B. (").*&

. ()).))

!. (,* %).<hen ?oogle's share price reached (),* per share6 ?oogle had a 4F8 ratio of

about % and an estimated mar0et capitali9ation rate of 11.*. ?oogle pays nodividends. Approimately what percentage of ?oogle's stoc0 price wasrepresented by 4H?=

A. $"

B. %,

. ,,

!. )

7/24/2019 FIN 320 Week 7 Quiz


%*. A firm has a stoc0 price of (** per share and a 4F8 ratio of ,*. #f you buy thestoc0 at this 4F8 and earnings fail to grow at all6 how long should you epect it tota0e to 3ust recover the cost of your investment=

A. ", years

B. /, years

. ** years

!. ,* years %. #n what industry are investors li0ely to use the dividend discount model and arrive

at a price close to the observed mar0et price=

A. #mportFeport trade

B. Software

. elecommunications

!. Utility %,. 8stimates of a stoc0's intrinsic value calculated with the free cash flow

methodology depend most critically on _______.

A. the terminal value used

B. whether one uses >>> or >>8

. the time period used to estimate the cash flows

!. whether the firm is currently paying dividends

%%.he greatest value to an analyst from calculating a stoc0's intrinsic value is _______.

A. how easy it is to come up with accurate model inputs

B. the precision of the value estimate

. how the process forces analysts to understand the critical variables that have thegreatest impact on value

!. how all the different models typically yield identical value results

7/24/2019 FIN 320 Week 7 Quiz


%$.<hich of the following valuation measures is often used to compare firms thathave no earnings=

A. 4rice-to-boo0 ratio

B. 4F8 ratio

. 4rice-to-cash-flow ratio

!. 4rice-to-sales ratio

FIN 320 Week 7 Quiz

Documents

Transcript of FIN 320 Week 7 Quiz