Q8.4 Assume an investor uses the constant-growth DVM to value a stock. Listed below are var- ious
Question:
Q8.4 Assume an investor uses the constant-growth DVM to value a stock. Listed below are var- ious situations that could affect the computed value of a stock. Look at each one of these indi- vidually and indicate whether it would cause the computed value of a stock to go up, down, or stay the same. Briefly explain your answers.
a. Dividend payout ratio goes up.
b. Stock's beta rises.
c. Equity multiplier goes down.
d. T-bill rates fall.
c. Net profit margin goes up.
f. Total asset turnover falls. g. Market return increases. Assume throughout that the current dividend (Do) remains the same and that all other variables in the model are unchanged.
Step by Step Answer:
Fundamentals Of Investing
ISBN: 9780136117049
11th Edition
Authors: Lawrence J. Gitman, Michael D. Joehnk, Scott B. Smart, Scott J. Smart