Question 1

Ryan Enterprises forecasts the free cash flows (in millions) shown below.The weighted average cost of capital is 13.0%,and the FCFs are expected to continue growing at a 5.0% rate after Year 3.What is the firm's total corporate value,in millions? ​

Accepted Answer

A)  $314.51
B)  $331.06
C)  $348.48
D)  $366.82
E)  $386.13F) C) and D)
G) A) and B)

Question 2

Kale Inc.forecasts the free cash flows (in millions) shown below.If the weighted average cost of capital is 11.0% and FCF is expected to grow at a rate of 5.0% after Year 2,what is the firm's total corporate value,in millions? ​

Accepted Answer

A)  $1,456
B)  $1,529
C)  $1,606
D)  $1,686
E)  $1,770F) A) and B)
G) B) and C)

Question 3

The constant growth DCF model used to evaluate the prices of common stocks is conceptually similar to the model used to find the price of perpetual preferred stock or other perpetuities.

Accepted Answer

A) True 
 B)False

Question 4

The corporate valuation model can be used only when a company doesn't pay dividends.

Accepted Answer

A) True 
 B)False

Question 5

Classified stock differentiates various classes of common stock,and using it is one way companies can meet special needs such as when owners of a start-up firm need additional equity capital but don't want to relinquish voting control.

Accepted Answer

A) True 
 B)False

Question 6

The corporate valuation model cannot be used unless a company pays dividends.

Accepted Answer

A) True 
 B)False

Question 7

Carter's preferred stock pays a dividend of $1.00 per quarter.If the price of the stock is $45.00,what is its nominal (not effective) annual rate of return?

Accepted Answer

A)  8.03%
B)  8.24%
C)  8.45%
D)  8.67%
E)  8.89%F) B) and E)
G) A) and D)

Question 8

Stock X has the following data.Assuming the stock market is efficient and the stock is in equilibrium,which of the following statements is CORRECT? ​

Accepted Answer

A)  The stock's required return is 10%.
B)  The stock's expected dividend yield and growth rate are equal.
C)  The stock's expected dividend yield is 5%.
D)  The stock's expected capital gains yield is 5%.
E)  The stock's expected price 10 years from now is $100.00.F) A) and B)
G) B) and C)

Question 9

If a stock's market price exceeds its intrinsic value as seen by the marginal investor,then the investor will sell the stock until its price has fallen down to the level of the investor's estimate of the intrinsic value.

Accepted Answer

A) True 
 B)False

Exam 9: Stocks and Their Valuation

The corporate valuation model cannot be used unless a company pays dividends.

Correct Answer
verified

Carter's preferred stock pays a dividend of $1.00 per quarter.If the price of the stock is $45.00,what is its nominal (not effective) annual rate of return?

Correct Answer
verified

Kale Inc.forecasts the free cash flows (in millions) shown below.If the weighted average cost of capital is 11.0% and FCF is expected to grow at a rate of 5.0% after Year 2,what is the firm's total corporate value,in millions?

Correct Answer
verified

The constant growth DCF model used to evaluate the prices of common stocks is conceptually similar to the model used to find the price of perpetual preferred stock or other perpetuities.

Correct Answer
verified

Stock X has the following data.Assuming the stock market is efficient and the stock is in equilibrium,which of the following statements is CORRECT?

Correct Answer
verified

The corporate valuation model can be used only when a company doesn't pay dividends.

Correct Answer
verified

Classified stock differentiates various classes of common stock,and using it is one way companies can meet special needs such as when owners of a start-up firm need additional equity capital but don't want to relinquish voting control.

Correct Answer
verified

If a stock's market price exceeds its intrinsic value as seen by the marginal investor,then the investor will sell the stock until its price has fallen down to the level of the investor's estimate of the intrinsic value.

Correct Answer
verified

Ryan Enterprises forecasts the free cash flows (in millions) shown below.The weighted average cost of capital is 13.0%,and the FCFs are expected to continue growing at a 5.0% rate after Year 3.What is the firm's total corporate value,in millions?

Correct Answer
verified

Exam 9: Stocks and Their Valuation

The corporate valuation model cannot be used unless a company pays dividends.

Correct AnswerverifiedShow Answer

Carter's preferred stock pays a dividend of $1.00 per quarter.If the price of the stock is $45.00,what is its nominal (not effective) annual rate of return?

Correct AnswerverifiedShow Answer

Kale Inc.forecasts the free cash flows (in millions) shown below.If the weighted average cost of capital is 11.0% and FCF is expected to grow at a rate of 5.0% after Year 2,what is the firm's total corporate value,in millions? ​

Correct AnswerverifiedShow Answer

The constant growth DCF model used to evaluate the prices of common stocks is conceptually similar to the model used to find the price of perpetual preferred stock or other perpetuities.

Correct AnswerverifiedShow Answer

Stock X has the following data.Assuming the stock market is efficient and the stock is in equilibrium,which of the following statements is CORRECT? ​

Correct AnswerverifiedShow Answer

The corporate valuation model can be used only when a company doesn't pay dividends.

Correct AnswerverifiedShow Answer

Classified stock differentiates various classes of common stock,and using it is one way companies can meet special needs such as when owners of a start-up firm need additional equity capital but don't want to relinquish voting control.

Correct AnswerverifiedShow Answer

If a stock's market price exceeds its intrinsic value as seen by the marginal investor,then the investor will sell the stock until its price has fallen down to the level of the investor's estimate of the intrinsic value.

Correct AnswerverifiedShow Answer

Ryan Enterprises forecasts the free cash flows (in millions) shown below.The weighted average cost of capital is 13.0%,and the FCFs are expected to continue growing at a 5.0% rate after Year 3.What is the firm's total corporate value,in millions? ​

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Kale Inc.forecasts the free cash flows (in millions) shown below.If the weighted average cost of capital is 11.0% and FCF is expected to grow at a rate of 5.0% after Year 2,what is the firm's total corporate value,in millions?

Correct Answer
verified

Correct Answer
verified

Stock X has the following data.Assuming the stock market is efficient and the stock is in equilibrium,which of the following statements is CORRECT?

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Ryan Enterprises forecasts the free cash flows (in millions) shown below.The weighted average cost of capital is 13.0%,and the FCFs are expected to continue growing at a 5.0% rate after Year 3.What is the firm's total corporate value,in millions?

Correct Answer
verified