1,What are the three levels of the top down approach and what do they focus on at each level?

industry: sector; market: asset type; company: firm

market: country; industry: sector; company: firm

company: firm; industry: industrials; market: country

market: asset type; industry: sector; company: firm

2.Use the dividend discount model to calculate the fair price of a stock that just paid a dividend of $1.00/share, has a beta of 1.15, and constant growth of 0.75% when the RFR is 2.5% and the market return is 8%.

$12.48

$11.52

$13.27

$15.75

3.What is the fair value for a firm that is expected to realize earnings per share of $3.50 next year, has a retention ratio of 60%, no growth prospects to speak of, and beta of 0.72 when the risk free rate is 3% and the market risk premium is 5%?

$20.72

$19.25

$19.57

$21.21

4.The country is in the grip of a pandemic crisis that is expected to last for two more years.The national retailer company, GoBuy is experiencing stellar economic performance from massive buying from a nervous population.GoBuy just paid a dividend of $2.25/share but expects to grow that by 5% during the time of the pandemic crisis.Afterwards, growth will tilt heavily back to 1.5%.The beta for GoBuy is 0.9, the RFR is 1%, and the market return is 6%.What is the fair value for GoBuy stock today?

$58.09

$59.74

$57.94

$61.02

5.What is the sustainable growth rate for a firm with a return on equity of 12% and retention rate of 40%?If it were to decrease its payout ratio would this raise or lower the sustainable growth rate of the firm?

3.9%; increase

3.9%; decrease

5.2%; increase

4.8%; increase

6.What is the return on equity for a firm with a sustainable growth rate of 3% and payout ratio of 65%?

9.12%

11.35%

10.08%

8.57%