In this chapter, we examined nine stock valuation procedures:

Zero-growth DVM

Constant-growth DVM

Variable-growth DVM

Free cash flow to equity approach

Expected return (IRR) approach

P/E approach

Price-to-cash-flow ratio

Price-to-sales ratio

Price-to-book-value ratio

Which one (or more) of these procedures would be appropriate when valuing:

A growth stock that pays little or nothing in dividends?

The S&P 500?

A relatively new company that has only a brief history of earnings?

A large, mature, dividend-paying company?

A preferred stock that pays a fixed dividend?

A company that has a large amount of depreciation and amortization?

Of the nine procedures listed previously, which three do you think are the best? Explain.

If you had to choose just one procedure to use in practice, which would it be? Explain. (Note: Confine your selection to the preceding list.)