True or False and why ? 9. The corporate valuation model will be very useful especially...
Homework Answers
9. TRUE.
Since the Corporate can be valued on the basis of its market Cap if the stocks are listed or on the basis of the Dividends. But when a company does not pay the dividend then it is very important to value the company on the basis of Corporate valuation model as because the corporate valuation model focus on the Asset and the growing capacity of the company. Hence when company doesn't pay dividend then Corporate valuation model becomes very much useful.
10. TRUE
In DCF model we find the value of the stock in terms of today or (t=0). Hence DCF focus on present value only and does not have any thing to deal with the period of holding. Hence in DCF, PV shall remain independent of the length of time the investor plans to hold it.
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True or False and why ?
9. The corporate valuation model will be very useful
especially...
1. According to the basic stock valuation model, the value an investor assigns to a share of stock is dependent upo...
1. According to the basic stock valuation model, the value an investor assigns to a share of stock is dependent upon the length of time the investor plans to hold the stock. 2. True b. False Market risk refers to the tendency of a stock to move with the general stock market. A stock with above-average market risk will tend to be more volatile than an average stock, and its beta will be greater than 1.0. a. True b. False...
II. TRUE/ FALSE Indicate whether the statement below is true or false ( 1 Point each)...
II. TRUE/ FALSE Indicate whether the statement below is true or false ( 1 Point each) The constant growth model is an approach to dividend valuation that assumes a constant future dividend. 2) The free cash flow valuation model is based on the same principle as the P/E valuation approach; that is, the value of a share of stock is the present value of future cash flows 3) In common stock valuation, any action taken by the financial manager that...
Quantitative Problem 2: Hadley Inc. forecasts the year-end free cash flows (in millions) shown below. 5...
Quantitative Problem 2: Hadley Inc. forecasts the year-end free cash flows (in millions) shown below. 5 Year 1 2 3 4 FCF -$22.74 $37.1 $43.1 $52.3 $55.3 The weighted average cost of capital is 12%, and the FCFs are expected to continue growing at a 5% rate after Year 5. The firm has $25 million of market value debt, but it has no preferred stock or any other outstanding claims. There are 18 million shares outstanding. Also, the firm has...
Ch 09: Assignment. Stocks and Their Valuation 6. Expected returns, dividends, and growth The constant growth...
Ch 09: Assignment. Stocks and Their Valuation 6. Expected returns, dividends, and growth The constant growth valuation formula has dividends in the numerator. Dividends are divided by the difference between the required return and dividend growth rate as follows: PD - Which of the following statements best describes how a change in a firm's stock price would affect a stock's capital gains yield? The capital gains yield on a stock that the investor already owns has an inverse relationship with...
The constant growth valuation formula has dividends in the numerator. Dividends are divided by the difference...
The constant growth valuation formula has dividends in the numerator. Dividends are divided by the difference between the required return and dividend growth rate as follows: Po = - D1 (rs - g) Which of the following statements best describes how a change in a firm's stock price would affect a stock's capital gains yield? The capital gains yield on a stock that the investor already owns has a direct relationship with the firm's expected future stock price. The capital...
Quantitative Problem 1: Assume today is December 31, 2019. Barrington Industries expects that its 2020 after-tax...
Quantitative Problem 1: Assume today is December 31, 2019. Barrington Industries expects that its 2020 after-tax operating income (EBIT(1 - T)] will be $450 million and its 2020 depreciation expense will be $60 million. Barrington's 2020 gross capital expenditures are expected to be $120 million and the change in its net operating working capital for 2020 will be $25 million. The firm's free cash flow is expected to grow at a constant rate of 5% annually. Assume that its free...
6. Expected returns, dividends, and growth Aa Aa The constant growth valuation formula has dividends in...
6. Expected returns, dividends, and growth Aa Aa The constant growth valuation formula has dividends in the numerator. Dividends are divided by the difference between the required return and dividend growth rate as follows: D1 (rs -g) Po Which of the following statements best describes how a change in a firm's stock price would affect a stock's capital gains yield? O The capital gains yield on a stock that the investor already owns has an inverse relationship with the firm's...
3. Fundamentals of the free cash flow corporate valuation model Aa Aa E Several methods can...
3. Fundamentals of the free cash flow corporate valuation model Aa Aa E Several methods can be used to compute the intrinsic value of a share of a company's common stock. One method uses the free cash flow (FCF) valuation model, while the another method uses the dividend discount model. The FCF valuation model computes a firm's value-also called its the value of its operating activities (Vop) and the value of firm's nonoperating value-as the sum of , where: the...
Year 1 2 3 4 5 FCF -$22.62 $38.7 $43.3 $52.6 $56.4 The weighted average cost...
Year 1 2 3 4 5 FCF -$22.62 $38.7 $43.3 $52.6 $56.4 The weighted average cost of capital is 9%, and the FCFs are expected to continue growing at a 4% rate after Year 5. The firm has $25 million of market-value debt, but it has no preferred stock or any other outstanding claims. There are 18 million shares outstanding. Also, the firm has zero non-operating assets. What is the value of the stock price today (Year 0)? Round your...
. Expected returns, dividends, and growth The constant growth valuation formula has dividends in the numerator....
. Expected returns, dividends, and growth The constant growth valuation formula has dividends in the numerator. Dividends are divided by the difference between the required return and dividend growth rate as follows: Pˆ0P̂0 = = D1(rs – g)D1(rs – g) Which of the following statements best describes how a change in a firm’s stock price would affect a stock’s capital gains yield? The capital gains yield on a stock that the investor already owns has an inverse relationship with the firm’s...
1. According to the basic stock valuation model, the value an investor assigns to a share of stock is dependent upon the length of time the investor plans to hold the stock. 2. True b. False Market risk refers to the tendency of a stock to move with the general stock market. A stock with above-average market risk will tend to be more volatile than an average stock, and its beta will be greater than 1.0. a. True b. False...
II. TRUE/ FALSE Indicate whether the statement below is true or false ( 1 Point each) The constant growth model is an approach to dividend valuation that assumes a constant future dividend. 2) The free cash flow valuation model is based on the same principle as the P/E valuation approach; that is, the value of a share of stock is the present value of future cash flows 3) In common stock valuation, any action taken by the financial manager that...
Quantitative Problem 2: Hadley Inc. forecasts the year-end free cash flows (in millions) shown below. 5 Year 1 2 3 4 FCF -$22.74 $37.1 $43.1 $52.3 $55.3 The weighted average cost of capital is 12%, and the FCFs are expected to continue growing at a 5% rate after Year 5. The firm has $25 million of market value debt, but it has no preferred stock or any other outstanding claims. There are 18 million shares outstanding. Also, the firm has...
Ch 09: Assignment. Stocks and Their Valuation 6. Expected returns, dividends, and growth The constant growth valuation formula has dividends in the numerator. Dividends are divided by the difference between the required return and dividend growth rate as follows: PD - Which of the following statements best describes how a change in a firm's stock price would affect a stock's capital gains yield? The capital gains yield on a stock that the investor already owns has an inverse relationship with...
The constant growth valuation formula has dividends in the numerator. Dividends are divided by the difference between the required return and dividend growth rate as follows: Po = - D1 (rs - g) Which of the following statements best describes how a change in a firm's stock price would affect a stock's capital gains yield? The capital gains yield on a stock that the investor already owns has a direct relationship with the firm's expected future stock price. The capital...
Quantitative Problem 1: Assume today is December 31, 2019. Barrington Industries expects that its 2020 after-tax operating income (EBIT(1 - T)] will be $450 million and its 2020 depreciation expense will be $60 million. Barrington's 2020 gross capital expenditures are expected to be $120 million and the change in its net operating working capital for 2020 will be $25 million. The firm's free cash flow is expected to grow at a constant rate of 5% annually. Assume that its free...
6. Expected returns, dividends, and growth Aa Aa The constant growth valuation formula has dividends in the numerator. Dividends are divided by the difference between the required return and dividend growth rate as follows: D1 (rs -g) Po Which of the following statements best describes how a change in a firm's stock price would affect a stock's capital gains yield? O The capital gains yield on a stock that the investor already owns has an inverse relationship with the firm's...
3. Fundamentals of the free cash flow corporate valuation model Aa Aa E Several methods can be used to compute the intrinsic value of a share of a company's common stock. One method uses the free cash flow (FCF) valuation model, while the another method uses the dividend discount model. The FCF valuation model computes a firm's value-also called its the value of its operating activities (Vop) and the value of firm's nonoperating value-as the sum of , where: the...
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