C a p i t a l S t r u c t u r e : S t o c k V a l u a t i o n D e s c r i b e t h e e v e n t s t h a t o c c u r i n a n e f f i c i e n t m a r k e t i n r e s p o n s e t o n e w i n f o r m a t i o n t h a t c a u s e s t h e e x p e c t e d r e t u r n t o e x c e e d t h e r e q u i r e d r e t u r n . W h a t h a p p e n s t o t h e m a r k e t v a l u e ? W h a t d o e s t h e e f f i c i e n t - m a r k e t h y p o t h e s i s ( E M H ) s a y a b o u t ( a ) s e c u r i t i e s p r i c e s , ( b ) t h e i r r e a c t i o n t o n e w i n f o r m a t i o n , a n d ( c ) i n v e s t o r o p p o r t u n i t i e s t o p r o f i t ? W h a t i s t h e b e h a v i o r a l f i n a n c e c h a l l e n g e t o t h i s h y p o t h es i s ? D e s c r i b e t h e f r e e c a s h f l o w v a l u a t i o n m o d e l a n d e x p l a i n h o w i t d i f f e r s f r o m t h e d i v i d e n d v a l u a t i o n m o d e l s . W h a t i s t h e a p p e a l o f t h i s m o d e l ?
C a p i t a l S t r u c t u r e : S t o c k V a l u a t i o n D e s c r i b e t h e e v e n t s t h a t o c c u r i n a n e f f i c i e n t m a r k e t i n r e s p o n s e t o n e w i n f o r m a t i o n t h a t c a u s e s t h e e x p e c t e d r e t u r n t o e x c e e d t h e r e q u i r e d r e t u r n . W h a t h a p p e n s t o t h e m a r k e t v a l u e ? W h a t d o e s t h e e f f i c i e n t - m a r k e t h y p o t h e s i s ( E M H ) s a y a b o u t ( a ) s e c u r i t i e s p r i c e s , ( b ) t h e i r r e a c t i o n t o n e w i n f o r m a t i o n , a n d ( c ) i n v e s t o r o p p o r t u n i t i e s t o p r o f i t ? W h a t i s t h e b e h a v i o r a l f i n a n c e c h a l l e n g e t o t h i s h y p o t h es i s ? D e s c r i b e t h e f r e e c a s h f l o w v a l u a t i o n m o d e l a n d e x p l a i n h o w i t d i f f e r s f r o m t h e d i v i d e n d v a l u a t i o n m o d e l s . W h a t i s t h e a p p e a l o f t h i s m o d e l ?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
C a p i t a l S t r u c t u r e : S t o c k V a l u a t i o n
- D e s c r i b e t h e e v e n t s t h a t o c c u r i n a n e f f i c i e n t m a r k e t i n r e s p o n s e t o n e w i n f o r m a t i o n t h a t c a u s e s t h e e x p e c t e d r e t u r n t o e x c e e d t h e r e q u i r e d r e t u r n . W h a t h a p p e n s t o t h e m a r k e t v a l u e ?
- W h a t d o e s t h e e f f i c i e n t - m a r k e t h y p o t h e s i s ( E M H ) s a y a b o u t ( a ) s e c u r i t i e s p r i c e s , ( b ) t h e i r r e a c t i o n t o n e w i n f o r m a t i o n , a n d ( c ) i n v e s t o r o p p o r t u n i t i e s t o p r o f i t ? W h a t i s t h e b e h a v i o r a l f i n a n c e c h a l l e n g e t o t h i s h y p o t h es i s ?
- D e s c r i b e t h e f r e e c a s h f l o w v a l u a t i o n m o d e l a n d e x p l a i n h o w i t d i f f e r s f r o m t h e d i v i d e n d v a l u a t i o n m o d e l s . W h a t i s t h e a p p e a l o f t h i s m o d e l ?
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