QUESTION 10 If a company can only earn the required rate of return on its book value, then investors should not be willing to pay more than book value for that company's stock. True False QUESTION 12 Valuation is the process by which forecasts of performance are converted into estimates of price. True False QUESTION 14 Strategy analysis provides a critical understanding of a company's value proposition and whether they are likely to sustain current performance into the future. True False 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 20 The phrase "terminal year" refers to A. the year when analysts believe the company will cease to exist B. the year the company files bankruptcy C. the last year in any given forecast D. the year the board expects the CEO to retire QUESTION 21 Which of the following are advantages of defining values in terms of ROE's (choose all that apply) A. It uses the same key measures of performance that are decomposed in a standard financial analysis B. ROE's are much easier to calculate than other performance measurements It enhances the analyst's ability to evaluate the reasonableness of their forecasts by benchmarking them with REO's of other companies in the industry D. All of the above QUESTION 23 Companies whose performance is highly sensitive to economy-wide changes, such as producers of luxury goods, manufacturers of cantial goods and construction companies will have risk betas A. less than 1 B. less than 0 C. greater than 1 D. none of the above