Homework Answers
The answer is FALSE
None of the Dividend Aprroach Strategies can be used for the valuation of a Startup Company because for any of the Start Ups, it takes a few years to break even and reach to a profitable stage. So it would be difficult or practically impossible for a startup company to distribute dividends to its shareholders. Hence the above mention Gordon's Formula cannot be used to value start up companies.
Rather the best approach to value start up companies would be : Standard Earnings Multiple Method, which uses the free cash flow approach.
Add Answer to:
The stock valuation model P = D1/(r-g) can be used to value start-up companies that pay...
14. The stock valuation model, PO = D1/(rs - g), can be used to value firms...
14. The stock valuation model, PO = D1/(rs - g), can be used to value firms whose dividends are expected to decline at a constant rate, i.e., to grow at a negative rate. True False
50. The Constant Dividend Model for calculating the intrinsic value of a stock is Io =D1/(k-g)...
50. The Constant Dividend Model for calculating the intrinsic value of a stock is Io =D1/(k-g) where K is the expected return of the market and g is growth rate of the company. The growth rate (g) of the company can be calculated by using the Capital Asset Pricing Model. a. True. b. False.
True or False and why ? 9. The corporate valuation model will be very useful especially...
True or False and why ? 9. The corporate valuation model will be very useful especially when a company doesn’t pay any dividends. 10. In the DCF valuation model, the present value of a stock is independent of the length of time the investor plans to hold it.
HW 08-Stocks and Their Valuation As companies evolve, certain factors can drive sudden growth. This may...
HW 08-Stocks and Their Valuation As companies evolve, certain factors can drive sudden growth. This may lead to a period of nonconstant, or variable, growth. This would cause the expected growth rate to increase or decrease, thereby affecting the valuation model. For companies in such situations, you would refer to the variable, or nonconstant, growth model for the valuation of the company's stock. Consider the case of Portman Industries: Portman Industries just paid a dividend of $2.16 per share. The...
Corporate valuation model The corporate valuation model, the price-to-earnings (P/E) multiple approach, and the economic value...
Corporate valuation model The corporate valuation model, the price-to-earnings (P/E) multiple approach, and the economic value added (EVA) approach are some examples of valuation techniques. The corporate valuation model is similar to the dividend-based valuation that you’ve done in previous problems, but it focuses on a firm’s free cash flows (FCFs) instead of its dividends. Some firms don’t pay dividends, or their dividends are difficult to forecast. For that reason, some analysts use the corporate valuation model. Charles Underwood Agency...
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...
Question 25 Which of the following statements regarding the Discounted Dividend Model is false? Companies who...
Question 25 Which of the following statements regarding the Discounted Dividend Model is false? Companies who do not pay regular dividends should use a different valuation model. The growth rate can equal the required rate of return on stock in the equation. The required rate of return on stock must be greater than the growth rate in the equation. The growth rate is expected to be constant forever.
8. Nonconstant growth stock Aa Aa As companies evolve, certain factors can drive sudden growth. This...
8. Nonconstant growth stock Aa Aa As companies evolve, certain factors can drive sudden growth. This may lead to a period of nonconstant, or variable, growth. This would cause the expected growth rate to increase or decrease, thereby affecting the valuation model. For companies in such situations, you would refer to the variable, or nonconstant, growth model for the valuation of the company's stock. Consider the case of Portman Industries: Portman Industries just paid a dividend of $1.68 per share....
One of the circumstances in which the Gordon growth valuation model for estimating the value of a share of stock should be used is ( A, the lack of data on dividend payments O B. declining dividends...
One of the circumstances in which the Gordon growth valuation model for estimating the value of a share of stock should be used is ( A, the lack of data on dividend payments O B. declining dividends O C. an erratic dividend stream O D. a steady growth rate in dividends
One of the circumstances in which the Gordon growth valuation model for estimating the value of a share of stock should be used is ( A, the lack of...
4. Corporate valuation model The corporate valuation model, the price-to-earnings (P/E) multiple approach, and the economic...
4. Corporate valuation model The corporate valuation model, the price-to-earnings (P/E) multiple approach, and the economic value added (EVA) approach are some examples of valuation techniques. The corporate valuation model is similar to the dividend-based valuation that you've done in previous problems, but it focuses on a firm's free cash flows (FCFS) instead of its dividends. Some firms don't pay dividends, or their dividends are difficult to forecast. For that reason, some analysts use the corporate valuation model. Charles Underwood Agency Inc....
14. The stock valuation model, PO = D1/(rs - g), can be used to value firms whose dividends are expected to decline at a constant rate, i.e., to grow at a negative rate. True False
HW 08-Stocks and Their Valuation As companies evolve, certain factors can drive sudden growth. This may lead to a period of nonconstant, or variable, growth. This would cause the expected growth rate to increase or decrease, thereby affecting the valuation model. For companies in such situations, you would refer to the variable, or nonconstant, growth model for the valuation of the company's stock. Consider the case of Portman Industries: Portman Industries just paid a dividend of $2.16 per share. The...
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...
Question 25 Which of the following statements regarding the Discounted Dividend Model is false? Companies who do not pay regular dividends should use a different valuation model. The growth rate can equal the required rate of return on stock in the equation. The required rate of return on stock must be greater than the growth rate in the equation. The growth rate is expected to be constant forever.
8. Nonconstant growth stock Aa Aa As companies evolve, certain factors can drive sudden growth. This may lead to a period of nonconstant, or variable, growth. This would cause the expected growth rate to increase or decrease, thereby affecting the valuation model. For companies in such situations, you would refer to the variable, or nonconstant, growth model for the valuation of the company's stock. Consider the case of Portman Industries: Portman Industries just paid a dividend of $1.68 per share....
One of the circumstances in which the Gordon growth valuation model for estimating the value of a share of stock should be used is ( A, the lack of data on dividend payments O B. declining dividends O C. an erratic dividend stream O D. a steady growth rate in dividends
One of the circumstances in which the Gordon growth valuation model for estimating the value of a share of stock should be used is ( A, the lack of...
4. Corporate valuation model The corporate valuation model, the price-to-earnings (P/E) multiple approach, and the economic value added (EVA) approach are some examples of valuation techniques. The corporate valuation model is similar to the dividend-based valuation that you've done in previous problems, but it focuses on a firm's free cash flows (FCFS) instead of its dividends. Some firms don't pay dividends, or their dividends are difficult to forecast. For that reason, some analysts use the corporate valuation model. Charles Underwood Agency Inc....
Most questions answered within 3 hours.
-
5. Discuss the use of fault tree analysis (FTA) for risk
assessment (maximum one paragraph).
asked 49 minutes ago -
Given that a sample of aluminium oxide has a Young's modulus of
393 GPa and a...
asked 2 hours ago -
At a certain temperature, the equilibrium constant, Kc, for this
reaction is 53.3.
H2(g)+I2(g)−⇀↽−2HI(g)Kc=53.3
At this...
asked 3 hours ago -
Question1 ) The STL provides similiar classes called stack and
queue, both of which gave functions...
asked 4 hours ago -
For Questions 1-4, assume you have 5 bits available:
1. For (positive) integers: What is the...
asked 4 hours ago -
convert grams into vloume with the density of water being at
.997514 g/cm^3 at 23.1 Celsuis...
asked 6 hours ago -
Foreman company obtained a $20,000, 6% loan on May 1, 2018.
Principal and interest will be...
asked 6 hours ago -
5. Problem 11.05 (Discounted Payback)
eBook
Project L costs $60,000, its expected cash inflows are $14,000
per...
asked 7 hours ago -
1. Which of the following is true about politics and health
organizations?
A. Health organizations are...
asked 7 hours ago -
A space vehicle is coasting at a constant velocity of 18.1 m/s
in the +y direction...
asked 8 hours ago -
5) Use the following balanced equation to answer questions
(a)-(i).
3 Cu(s) + 8 HNO3(aq) →...
asked 8 hours ago -
A three-year maturity bond with a 12% annual coupon rate is
currently traded at par $1000...
asked 8 hours ago