Question

34. _______

Deployment Specialists pay a current (annual) dividend of $3 and is expected to grow at 10% for four

years and then at 5% thereafter. If the required return for Deployment Specialists is 10%, what is the

intrinsic value of Deployment Specialist’s work?

(ASSUME THE CURRENT DIVIDEND WAS

ALREADY PAID AND SHOULD NOT BE INCLUDED IN YOUR FINAL ANSWER)

A. $69

B. $72

C. $75

D. $78

E. S81

35. _______

Which of the following investment tips was not discussed in class?

A. When everyone agrees, everyone is wrong.

B. Be greedy when others are afraid. Be afraid when others are greedy.

C. Be a contrarian if you are not the first in line.

D. Don’t lose sight of the trees due to the forest.

E. You’re only as good as your next trade.

36. _______

In which of the following circumstances is it most important to use multistage dividend discount models

rather than a constant-growth models??

A. When valuing companies with temporarily high dividends

B. When valuing companies with temporarily high dividend growth rates

C. When valuing companies with temporarily high earnings

D. When valuing companies with temporarily high required rates of return

E. When valuing companies with temporarily high prices

38. _______

Assume that the “bird-in-hand” percentage of a stock price equals “value” and the “bird-in-bush”

percentage equals “growth.” Using the information in the previous problem, would you label Sisters

Corm a growth stock or a value stock?

A. It’s definitely more of a growth stock. About 60% of the stock price comes from PVGO.

B. It’s slightly more of a growth stock. About 53% of the stock price comes from PVGO.

C. It could be viewed as a growth or value stock. Exactly 50% of the stock price comes from PVGO.

D. It’s slightly more of a value stock. About 47% of the stock price comes from PVGO.

E. It’s definitely more of a value stock. About 40% of the stock price comes from P

39. _______

The market capitalization rate for Admiral Motors Company (AMC) is 11%. Its expected ROE is 15%

and its expected EPS is $5. If the firm’s plowback ratio is 20%, what will be its P/E ratio?

A. 10

B. 11

C. 12.5

D. 14

E. 15

40. _______

In the previous problem, if the industry average P/E is 12.5, what could you conclude about Admiral

Motors Company (AMC)?

A. Growth investors would be very interested in AMC.

B. Warren Buffett would not be very interested in AMC.

C. AMC is properly valued for its industry

D. AMC has a lower P/E than the industry average and would be undervalued by value investors.

E. AMC has a higher P/E than the industry average and would be overvalued by value in

Answer 1

34

	Required rate=	10.00%
Year	Previous year dividend	Dividend growth rate	Dividend current year	Horizon value	Total Value	Discount factor	Discounted value
1	3	10.00%	3.3		3.3	1.1	3
2	3.3	10.00%	3.63		3.63	1.21	3
3	3.63	10.00%	3.993		3.993	1.331	3
4	3.993	10.00%	4.3923	92.238	96.6303	1.4641	65.9998
	Long term growth rate (given)=	5.00%			Value of Stock =	Sum of discounted value =	75
Where
Current dividend =Previous year dividend*(1+growth rate)^corresponding year
Total value = Dividend + horizon value (only for last year)
Horizon value = Dividend Current year 4 *(1+long term growth rate)/( Required rate-long term growth rate)
Discount factor=(1+ Required rate)^corresponding period
Discounted value=total value/discount factor

Please ask remaining parts seperately, questions are unrelated