Which of the following statements is FALSE? The value of a share is equal to the...
Which of the following statements is FALSE?
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The value of a share is equal to the present value of all future earnings (EPS). |
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P/E ratio is also called earnings multiple because P = appropriate P/E * EPS. |
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All else equal, if stock A's dividends grow at a higher rate than stock B's dividends, A is valued higher than B. |
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If the current market share price is higher than its intrinsic value, it is over-valued. |
Homework Answers
Answer : "The value of a share is equal to the present value of all future earnings (EPS)."
=> This is because the value of a share is equal to the present value of future dividend per share. ( not future earnings ie. EPS).
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Which of the following statements is FALSE?
The value of a share is equal to the...
Company A is expected by analysts to generate Earnings Per Share (EPS) in 2020 of $4.10....
Company A is expected by analysts to generate Earnings Per Share (EPS) in 2020 of $4.10. Company A's stock price is $50 per share. Company B is expected by analysts to generate Earnings Per Share (EPS) in 2020 of $1.25. Company B's stock price is $75 per share. *Calculate the Price-to-Earnings (P/E) ratio based on 2020 estimated earnings for Company A and Company B. *Why in general might Company B's P/E multiple be higher than Company A's? *If you knew...
MULTIPLE CHOICES value of each year's coupon payiments b. The yield to maturity is a measure...
MULTIPLE CHOICES
value of each year's coupon payiments b. The yield to maturity is a measure of a bond's total return, only including the coupon income. . If you buy the bond today and hold it to maturity, your return will be yield to d. The relationship between price and yield is that the higher the price you pay for a bond, the higher the yield 1o. Which one of the following statements is correet regarding interest rates and bond...
Please evaluate the two statements below, true or false? 1: All stocks with equivalent risk are...
Please evaluate the two statements below, true or false? 1: All stocks with equivalent risk are priced to offer the same expected rate of return 2: The value of a share of a stock is equal to the present value of future dividends per share.
Market value ratios Ratios are mostly calculated using data drawn from the financial statements of a...
Market value ratios Ratios are mostly calculated using data drawn from the financial statements of a firm. However, another group of ratios, called market value ratios, relate to a firm’s observable market value, stock prices, and book values, integrating information from both the market and the firm’s financial statements. Consider the case of Cold Goose Metal Works Inc.: Cold Goose Metal Works Inc. just reported earnings after tax (also called net income) of $8,000,000 and a current stock price of...
7) List the key variables that affect the P/E ratio and explain the relationship between each...
7) List the key variables that affect the P/E ratio and explain the relationship between each variable and the P/E ratio. (a) growth rate in earnings; the higher the growth rate, the higher the P/E ratio (b) general state of the economy, the better the economic outlook, the higher the P/E (e) amount of debt in a company's capital structure; the lower the debt ratio, the higher the P/E (d) current and projected rate of inflation; the lower the inflation,...
2) (4 pts) You estimate that Company X will have earnings per share (EPS) of $4.00...
2) (4 pts) You estimate that Company X will have earnings per share (EPS) of $4.00 next year (end of 2020) and EPS of $4.80 in 2 years (2021). You also estimate that Company X will sell at a P/E multiple of 23 in two years. The dividend payout ratio is expected to be 40%. a) What is your estimation of the intrinsic value of Company X if your required rate of return is 8.0% 2020 2021 Dividends Selling Price...
luck! Question 3 All else being equal, which of the following statement about time value of...
luck! Question 3 All else being equal, which of the following statement about time value of money is NOT correct? The higher the discount rate, the lower the present value The higher the interest rate, the higher the future value The higher the number of periods, the lower the present value The higher the present value, the lower the future value - Previous Quiz sa required precision (ie, the number of digits after the decimal point). Good luck! Question 4...
Which one of the following statements correctly defines a time value of money relationship? Multiple Choice...
Which one of the following statements correctly defines a time value of money relationship? Multiple Choice 2.5 points eBook • Time and future values are inversely related, all else held constant. Print References O Interest rates and time are positively related, all else held constant. O An increase in a positive discount rate increases the present value. O An increase in time increases the future value given a zero rate of interest. O Time and present value are inversely related,...
6. Market value ratios Ratios are mostly calculated using data drawn from the financial statements of...
6. Market value ratios Ratios are mostly calculated using data drawn from the financial statements of a firm. However, another group of ratios, called market value ratios, relate to a firm's observable market value, stock prices, and book values, integrating information from both the market and the firm's financial statements. Consider the case of Green Caterpillar Garden Supplies Inc.: Green Caterpillar Garden Supplies Inc. just reported earnings after tax (also called net income) of $95,000,000 and a current stock price...
1. ABC Corp. has an ROE (return on reinvested earnings) of 20% and a dividend payout...
1. ABC Corp. has an ROE (return on reinvested earnings) of 20% and a dividend payout ratio of 40%. The next annual earnings are expected to be $3 per share (that is, EPS in year 1 is $3.00). The firm's required return on the stock is 17%. The value of the stock today is $____________. 2. Company A just paid a $1.00 dividend per share and its future dividends are expected to grow at an annual rate of 6% for the...
MULTIPLE CHOICES
value of each year's coupon payiments b. The yield to maturity is a measure of a bond's total return, only including the coupon income. . If you buy the bond today and hold it to maturity, your return will be yield to d. The relationship between price and yield is that the higher the price you pay for a bond, the higher the yield 1o. Which one of the following statements is correet regarding interest rates and bond...
7) List the key variables that affect the P/E ratio and explain the relationship between each variable and the P/E ratio. (a) growth rate in earnings; the higher the growth rate, the higher the P/E ratio (b) general state of the economy, the better the economic outlook, the higher the P/E (e) amount of debt in a company's capital structure; the lower the debt ratio, the higher the P/E (d) current and projected rate of inflation; the lower the inflation,...
2) (4 pts) You estimate that Company X will have earnings per share (EPS) of $4.00 next year (end of 2020) and EPS of $4.80 in 2 years (2021). You also estimate that Company X will sell at a P/E multiple of 23 in two years. The dividend payout ratio is expected to be 40%. a) What is your estimation of the intrinsic value of Company X if your required rate of return is 8.0% 2020 2021 Dividends Selling Price...
luck! Question 3 All else being equal, which of the following statement about time value of money is NOT correct? The higher the discount rate, the lower the present value The higher the interest rate, the higher the future value The higher the number of periods, the lower the present value The higher the present value, the lower the future value - Previous Quiz sa required precision (ie, the number of digits after the decimal point). Good luck! Question 4...
Which one of the following statements correctly defines a time value of money relationship? Multiple Choice 2.5 points eBook • Time and future values are inversely related, all else held constant. Print References O Interest rates and time are positively related, all else held constant. O An increase in a positive discount rate increases the present value. O An increase in time increases the future value given a zero rate of interest. O Time and present value are inversely related,...
6. Market value ratios Ratios are mostly calculated using data drawn from the financial statements of a firm. However, another group of ratios, called market value ratios, relate to a firm's observable market value, stock prices, and book values, integrating information from both the market and the firm's financial statements. Consider the case of Green Caterpillar Garden Supplies Inc.: Green Caterpillar Garden Supplies Inc. just reported earnings after tax (also called net income) of $95,000,000 and a current stock price...
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