Which of the following statements is most accurate in analyzing a stock? If the expected return exceeds its required return__________________ a. The stock should be sold. b. The stock is good to buy. c. The management is probably not trying to maximize the price per share. d. Dividends are not likely to be declared e. The stock is experiencing supernormal growth

Which of the following statements is most accurate in analyzing a stock? If the expected return exceeds its required return__________________ a. The stock should be sold. b. The stock is good to buy. c. The management is probably not trying to maximize the price per share. d. Dividends are not likely to be declared e. The stock is experiencing supernormal growth

Financial Management: Theory & Practice

16th Edition

ISBN:9781337909730

Author:Brigham

Publisher:Brigham

Chapter25: Portfolio Theory And Asset Pricing Models

Section: Chapter Questions

Problem 9MC

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Similar questions

You, in analyzing a stock, find that its expected return exceeds its required return. This suggests that you think a. the stock should be sold. b. the stock is a good buy. c. management is probably not trying to maximize the price per share. d. dividends are not likely to be declared. e. the stock is experiencing supernormal growth.
If the intrinsic value of a stock is greater than its market value, which of the following is a reasonable conclusion? O 1. The stock offers a high dividend payout ratio. O 2. The market is overvaluing the stock. O 3. The stock has a low level of risk. O 4. The market is undervaluing the stock.
If the expected rate of return on a stock is less than the required rate of return, The stock is experiencing supernormal growth. The stock should not be bought. The company is probably not trying to maximize its stock price. The stock is a good buy. Dividends are not being declared.
An analyst is trying to determine the intrinsic value of a certain share. Which of the following is true with regards to the methods of stock valuation? a. Discounting techniques does not involve forecasting future dividends b. Free cash flow is important in discounted dividend model c. Aside from the intrinsic value, the market value of the firm can also be determined by free cash flow model d. Non-constant growth stock is valuated in the same way as preferred stock
According to the efficient market theory, whenever investors find that the required return of stock is less than the expected return of the stock, the investor will buy the stock. This will: a. drive the price up b. cause the market to crash c. drive the price down d. not affect the price
Which of the following statement(s) is(are) TRUE? (i) The valuation price of a stock primarily depends on expected future dividends to its shareholders and its required rate of return. (ii) An investor who intends to sell a stock after holding it for a short period will forgo all future dividends, thus will be willing to pay for a lower price for the stock compared to another investor who prefers to hold the share for a longer period. (iii) The valuation share price is positively related to the share's required rate of return.
Which of the following will increase the price of a stock? Group of answer choices: A. Decrease in the required rate of return B. Decrease in the dividend growth rate C. Delay in the payment of dividends D. Decrease in earnings growth
A stock has a negative beta and does not pay dividends. Given this information, a model that is valid for calculating a required return for this stock is the A. Constant Dividend Growth Model (DCF) B. Capital Asset Pricing Model (CAPM) C. Internal Rate of Return Model (IRR) D. Weighted Average Cost of Capital Model (WACC)
Particulars 1. Discount rate АВС XYZ 18.5% 14.25% Not 2. Historical growth rate 2.2218% available 3. Sustainable growth 4.5% 20% rate 4. Fundamental value of stock using dividend growth model through historical growth rate 5. Fundamental value of stock using dividend growth model through sustainable growth rate 6. Fundamental value of stock using residual income growth model through historical growth rate 7. Fundamental value of stock using residual income growth model through sustainable growth rate Not Tavailable 3395 Not available 3953 Not 427.30 available 420.35 1 96.5
Which of the following statements is most likely FALSE? ... O A. We should use the general dividend discount model to value the stock of a firm with rapid or changing growth. O B. As firms mature, their growth slows to rates more typical of established companies. Oc. The dividend discount model values the stock based on a forecast of the future dividends paid to shareholders.
The dividend growth model of stock evaluation relies on several assumptions that might not be true in the real world. What are they?
you MUST explain your answer. Also, explain why 1 or 2 of the other options are FALSE: >>> Which of the following statements is CORRECT? a. The constant growth model takes into consideration the capital gains investors expect to earn on a stock. b. Two firms with the same expected dividend and growth rate must also have the same stock price. c. It is appropriate to use the constant growth model to estimate a stock’s value even if its growth rate is never expected to become constant. d. If a stock has a required rate of return rs = 12%, and if its dividend is expected to grow at a constant rate of 5%, this implies that the stock’s dividend yield is also 5%. e. The price of a stock is the present value of all expected future dividends, discounted at the dividend growth rate.