28.

The management of Hytrew Limited, a utility company, announced that the firm is expected to continue to generate its current return on common equity (ROCE) of 8% indefinitely. As this ROCE is below the firms required return on equity of 10%, the firm also announced that it will return all earnings to shareholders as dividends. The firms intrinsic price-to-book ratio should be:

Select one:

a.

0.80

b.

1.20

c.

1.25

d.

0.67

29.

Which of the following statements is not true about passive investor:

Select one:

a.

A passive investor assumes that the investment is efficiently priced

b.

When a passive investor considers buying a companys common stocks on the secondary market, he cares about both fundamental and price risk.

c.

A passive investor does not investigate the price at which he buys an investment.

d.

A passive investor earn the normal return for the risk he takes on.

30.

Which methods are not used by an active investor to challenge the market price?

Select one:

a.

Apply method of comparable to challenge the market price

31.

Growth is risky because:

Select one:

a.

Growth can be competed away by competitors, unless companies builds a moat around its castle

b.

Growth refers to outcomes in medium-term run, and medium-term is uncertain

c.

None of the answers listed

d.

Growth refers to outcomes in a short-term run, and short-term is uncertain

32.

Active investing does not require us to discover intrinsic value. All that is required is to accept or reject the market valuation.

Select one:

a.

False

b.

True

b.

All of the answers listed are methods by an active investor to challenge the market price.

c.

Asses the risk of paying too much, by calculating the expected return to buying at the market price.

d.

Understand the markets growth forecast and then ask if that growth rate is justified, too high, or too low.