Q8.2 In this chapter, we examined nine different stock valuation procedures: Zero-growth DVM Constant-growth DVM Variable-growth DVM Dividends-and-carnings (D&E) approach Expected return (IRR) approach P/E approach Price-to-cash-flow ratio Price-to-sales ratio Price-to-book-value ratio

a. Which one (or more) of these procedures would be most appropriate when trying to put a value on: 1. A growth stock that pays little or nothing in dividends? 2. The S&P 500? 3. A relatively new company that has only a brief history of earnings? 4. A large, mature, dividend-paying company? 5. A preferred stock that pays a fixed dividend? 6. A company that has a large amount of depreciation and amortization?

b. Of the nine procedures listed above, which three do you think are the best? Explain.

c. If you had to choose just one procedure to use in practice, which would it be? Explain. (Note: Confine your selection to the list above.)