Which of the following statements is true about the general dividend valuation model?
A) It implies that the underlying value of a share of stock is determined by the market's expectations of the future dividends that the firm will generate.
B) It implies that the value of a firm's common stock can be determined only if the expected future dividends are infinite.
C) It implies that the value of a growth stock can be determined by forecasting the future price of the stock.
D) The model cannot be used to calculate the value of a common stock unless the dividends exceed the firm's expected growth rate.
Answer: A
Finance
- There are those that believe that the analysis of financial statements has limitations. Which of the statements below would qualify as a limitation of financial statement analysis?
- Which of the following is not a method of "benchmarking"?
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- Which of the following is a benefit of a common-size income statement?
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- DuPont equation: Saunders, Inc., has a ROE of 18.7 percent, an equity multiplier of 2.53, sales of $2.75 million, and a total assets turnover of 2.7 times. What is the firm's net income?
- DuPont equation: Andrade Corp has debt of $2,834,950, total assets of $5,178,235, sales of $8,234,121, and net income of $812,355. What is the firm's return on equity?
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- DuPont equation: GenTech Pharma has reported the following information: Sales/Total assets = 2.89; ROA = 10.74%; ROE = 20.36% What are the firm's profit margin and equity multiplier?
- Profitability ratio: Juventus Corp has total assets of $4,744,288, total debt of $2,912,000, and net sales of $7,212,465. Their net profit margin for the year is 18 percent. What is Juventus's ROA?
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- Market-value ratio: RTR Corp. has reported a net income of $812,425 for the year. The company's share price is $13.45, and the company has 312,490 shares outstanding. Compute the firm's price-earnings ratio.
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- Leverage ratio: What will be a firm's equity multiplier given a debt ratio of 0.45?
- Leverage ratio: Your firm has an equity multiplier of 2.47. What is its debt-to-equity ratio?
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- Coverage ratio: Trident Corp. has debt of $3.35 million with an interest rate of 6.875 percent. The company has an EBIT of $2,766,009. What is its times interest earned?
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- Efficiency ratio: Jet, Inc., has net sales of $712,478 and accounts receivables of $167,435. What are the firm's accounts receivables turnover and days' sales outstanding?
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