Security Analysis hw

20. Joel Greenblatt cautions that companies earning high returns on capital will attract competition (capitalism is a tough system) that will destroy their ability to earn abovelong run. A) True B) False 21. Stockholders of Dog's R Us Pet Supply expect a 12% rate of return on their stock. Management has consistently been generating a ROE (return on equity) of 15% Over the last 5 years but now believes that ROE will be 12% for the next five years. Given this, the firm's optimal dividend payout ratio is now A) 100% B) 0% C) between 0% and 50% D) between 50% and 100% 22. Which of the following valuation measures is often used to compare firms that have earnings? A) price-to-book ratio B) P/ E ratio C) price-to-cash-flow ratio D) price-to-sales ratio 23. The price-to-earnings ratio depends on the growth rate and On tis A) positively; positively B) negatively; negatively C) positively; negatively D) negatively; positively 24. Buffett's macroeconomic indicator for the stock market is the ratio. A) total market cap/GDP B) GDP/total market cap C) total market cap/replacement value D) GDP/enterprise value E) total market cap/liquidation value