6) Which of the following statements concerning the constant-growth dividend valuation model is (ar) correct 1. One simple method of estimating the dividend growth rate is to analyze the historical paltem of dividends II. The expected total return equals the return from capital gains plus the return from dividends TIL. The model is applicable to growth firms with initially high growth rates. IV. The intrinsic value calculated using this method can change from one investor to another if their risk-return payoffs differ A) I and IV only B) Il and Ill only C) Illand IV only D) I, II and Ill only Answer: 7) List the key variables that affect the PE ratio and explain the relationship between each variable and the P/E ratio (a) growth rate in carings the higher the growth rate, the higher the PE ratio (b) general state of the economy, the better the economie Outlook, the higher the PE (c) amount of debt in a company's capital structure, the lower the debt ratio, the higher the PE (d) current and projected rate of inflation the lower the inflation, the higher the PE (e) level of dividends: the lower the dividend payout, the higher the PE Answer: 8) Which of the following factors are considered when analyzing an industry? I the nature and conditions of governmental regulations II the involvement and relations, if any, with labor unions III. the development of new technologies relevant to the industry IV. the extent of competition within the industry A) I, II and IV only B) II, III and IV only C) III and Ill only D) I, II, III and IV Answer: 9) Which one of the following statements concerning accounting reports is correct? A) The income statement reflects the position of a firm as of a single point in time, B) The total equity of a firm is equal to the total assets plus the total liabilities. C) The statement of cash flows identifies both the sources and the uses of cash D) The income statement reflects the amount of cash available for investment and financing activities 10) On March 31, Adolpha, Inc. reported the following information on its financial statements. Total assets Total long-term assets Totalrent libilities Total long- dubt S02174 $212864 S65.215 2005 What is the available net working capital for Adolpha, Inc.? A) -$253844 B)-$132.366 CSI21.578 D) SI873020 Answer. 1) Anivorould purchase a seck when A) the market price exceeds the intrinsic value B) the expected rate of return equals or exceeds the required turn C) the capital gains rate is less than the required rumande dividends are paid D) the market price is greater than the justified price Answer 2) Which of the following variables used in determining a stock's intrinsic value can be known with the greatest level of confidence! A) future carnings B) expected return on the market C) the risk free rate of retum D) future dividends Answer: 3) The most uncertain value used in the Capital Asset Pricing Model is A) beta B) the risk-fresate C) expected return on the market D) all we equally uncertain Answer: 4) Michelak's Maritime Industries as relatively stable caring and as an audividend of $3.00 per share. This dividend has remained constant over the past few years and is expected to emain constant for some time to come. If you want to cam 11 on c e in the common stock of Michalak's, how much should you pay to purchase cach share of stock A) SI2.50 B) $18.88 C) $20.83 D) Answer: 5) What is the required of return on the set to pay $0.75 dividend next year if dividends are expected to grow a 2 percent annually and the current stock price is $8597 A) X.73% B) 919 C) 10.7395 D) 11 1996 Answer: 6) Which of the following statements concerning the constgrowth dividend valuation model is are correct? 1. One simple method of estimating the dividend growth rate is to analyze the historical pallem of dividends IL The expected to return equals the return from capital gains plus the return from dividends e ri III. The model is applicable to growth firms with initially high growth rates IV. The intrinsic value akulated using this method can change from one investe their risk return puyodis differ Aland IV only B) II and Ill only C) I, II and IV only D) Illand Illy List the key variables that affect the Period explain the relationship between each variable and the PE ratio (a) growth rate in caring the higher the powth rate the higher the PE ratio (b) general state of the conmythe better the economic outlook, the higher the PE (e) amount of debt in a companys capital structure the lower the debemti, the higher the (d) current and projected rate of inflation the lower the inflation the higher the PE