1. Which of the following statements correctly describes the theoretical basis for the market value (market price) of one share of common stock?

A. The market value of one share equals the sum of expected future dividends

		B. The market value of one share equals the discounted present value of expected future dividends
		C. The market value of one share equals its maturity value

2. Which of the following companies would typically have the highest P/E ratio?

A.	A young, growing company
	B.	A mature, stable company
	C.	An old, declining company

3. The _________ is THE discount rate that equates the present value of the cash inflows with the initial investment (and also sets the Net Present Value of an investment equal to zero).

A. Payback period

	B.	Average rate of return
		C, Cost of capital
		D. Internal rate of return