Companies with positive Abnormal ROE's are able to invest their net assets to create value for shareholders and will have equity value-to-book ratios

A. Less than 1

b. Greater than 5

C. Greater than 1

D. Less than 0

QUESTION 17 The magnitude of a company's value-to-book ratio depends heavily on its

A. expected book equity growth

B. profit margins

C. sales turnover

D. none of the above

QUESTION 18

Companies can grow their equity base by (chose all that apply)

A. taking out new long term debt

B. issuing new stock

C. taking on additional short term debt

D. reinvesting profits

QUESTION 19 Valuation under the Discounted Cash Flow method involves

A. Forecasting free cash flows available to equity holders over a finite forecast horizon

B. Forecasting free cash flows beyond the terminal year based on some simplified assumptions

C. Discounting free cash flows to equity holders at the cost of equity

D. All of the above

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