A firms common stock is currently selling for $12.50 per share. The required rate of return is 9% and the company will pay an annual dividend of $.50 per share one year from now which will grow at a constant rate for the next several years. The growth rate should be 5%.

True

False

Both bond and stock valuation models use discounted cash flows to estimate the present value or value of the security.

True

False

Company X has a sales price of $4.00 per unit and a variable cost of $3.40 per unit; fixed costs are $13,000, no debt, and sales of 250,000 units per year. It is in the 40% tax bracket. Then the degree of financial leverage DFL for Company X is 1.

True

False