1.Explain the steps required to estimate the price per share using the FCF valuation model.

2.Explain the constant growth model when applied to FCF and dividends. Also show the equation used for each.

Explain the horizon value when applied to FCF and dividends. Also show the equation used for each.

Are stock values more affected by short-term cash flows or by long-term cash flows? Explain.

3.Describe two reasons why managers might focus on quarterly earnings.

4.Define the following terms:

Value drivers

Value-based management

5.Why doesn't a volatile stock price necessarily imply irrational pricing?

6.Define the following terms:

Expected value

Market price

7.Define the following terms:

Required rate of return

Expected rate of return

Actual (realized) rate of return

8.Define the following terms:

Capital gains yield

Dividend yield

9.Explain the multistage valuation model when applied to FCF and dividends. Also show the equation used for each.

10.Are stock prices affected more by long-term or short-term performance? Explain.

11.Explain the market multiple method.

12.What situation is ideally suited to valuation with the dividend growth model? Explain.

13.What are the advantages of the FCF valuation model relative to the dividend growth model and the market multiples model?

14.Which method is best suited to determine the value of a division or business unit that is part of a larger company? Explain.

15.Explain why preferred stock is considered a hybrid security. How is the value determined?