Senturo Incs stock is currently trading at $58 per share. Last year the companys EPS amounted to $4.25. Given that the average trailing P/E of peer companies is 15, the companys stock is most likely:

Select one:

a.

Undervalued

b.

Fairly valued

c.

Overvalued

Question 2

An analyst gathered the following information regarding a company:

• Common stock (issued 50,000 common shares) = $1 million
• Preferred stock (issued 3,000 preferred shares) = $90,000
• Additional paid-in capital = $5,000
• Retained earnings = $60,000
• Total shareholders' equity = $1,155,000

Given that the company's share is currently trading at $38.25, its P/B ratio is closest to:

Select one:

a.

1.66

b.

35.92

c.

1.80

Question 3

The stock of Rex Ltd is currently trading at $42. The company just reported sales amounting to $18 million and has 3 million shares outstanding. Given that the benchmark P/S multiple is 7, the stock is most likely:

Select one:

a.

Undervalued.

b.

Fairly valued.

c.

Overvalued.

Question 4

On June 30, 2012, the stock of Beta Ltd was trading at $35.80 per share. The following information regarding the company's historical semi-annual dividends is also available:

Dividends paid per share on:

• December 31, 2010 = $0.80
• June 30, 2011 = $0.30
• December 31, 2011 = $0.90
• June 30, 2012 = $0.35

Next year's expected dividend is $1.60 per share, when the stock is expected to sell for $39.50.

The company's trailing and leading dividend yields are closest to:

	Trailing Dividend Yield	Leading Dividend Yield
A	3.91%	4.47%
B	3.91%	4.05%
C	3.49%	4.47%

Select one:

a.

Row A

b.

Row B

c.

Row C

Use the following information to answer Questions 5 and 6:

On January 1, 2012, the stock of Jupiter Inc is trading at $21.50. Sara is analyzing the company's stock and decides to normalize the company's earnings as part of her analysis. She gathers the following information regarding the company's earnings per share (EPS), book value per share (BVPS), and return on equity (ROE) from 2006 to 2011.

Measure	2006	2007	2008	2009	2010	2011
EPS ($)	0.58	0.67	0.75	0.83	1.02	1.10
BVPS ($)	2.98	3.25	4.02	4.70	5.15	5.59
ROE (%)	8.20	9.58	10.85	14.20	21.45	27.20

Question 5: Using normalized EPS based on historical average EPS, the P/E ratio is closest to:

Select one:

a.

19.54

b.

28.54

c.

26.06

Question 6

Using normalized EPS based on average ROE, the P/E ratio is closest to:

Select one:

a.

25.23

b.

32.93

c.

18.46

Question 7

Jonathan is evaluating the stock of Pyramid Constructors, which is currently trading at $34 per share. He gathers the following information regarding the company:

• Sales per share = $9.71
• Long-term profit margin = 11.50%
• Dividend payout ratio = 35%
• Earnings growth rate = 9%
• Required rate of return on equity = 10%

Based on the justified P/S multiple, the stock is most likely:

Select one:

a.

Undervalued.

b.

Fairly valued.

c.

Overvalued.

Question 8

An analyst gathered the following information regarding the stock of Pluto Inc:

• Current market price = $46
• Required rate of return on equity = 12%
• Consensus growth = 5%

Given that the stock offers a dividend yield of 5.5%, based on its justified dividend yield, the stock is most likely:

Select one:

a.

Undervalued.

b.

Fairly valued.

c.

Overvalued.

Question 9.

Allan is evaluating the stock of Alpha Ltd and gathers the following information regarding the company and its two closest competitors, Beta Ltd and Gamma Ltd:

Company	P/B Ratio	Forecasted ROE	Beta
Alpha Ltd	2.15	16.25%	0.90
Beta Ltd	2.90	14.85%	1.20
Gamma Ltd	2.15	12.60%	1.20

Based on the given information, the stock of Alpha Ltd is most likely:

Select one:

a.

Undervalued.

b.

Fairly valued.

c.

Overvalued.

Question 10

Samantha is contemplating investing in one of three stocks, Alpha, Beta, and Gamma. She gathers the following information:

Company	Forward P/E	5-Year EPS Growth Forecast
Alpha	9.25	13%
Beta	8.65	13%
Gamma	11.8	15%

Given the information above, which stock should Samantha invest in?

Select one:

a.

Alpha.

b.

Beta.

c.

Gamma.

Question 11.

An analyst gathered the following information regarding Violet Inc:

• Market value of common shares outstanding = $7 million
• Market value of preferred stock = $2 million
• Market value of debt = $10.5 million
• Non-controlling interest = $1.5 million
• Cash and short-term investments = $1.2 million
• Revenues = $9 million
• Depreciation and amortization expense = $0.8 million
• Interest expense = $0.25 million
• Taxes = $0.4 million
• Net income = $3.2 million

The EV/EBITDA ratio for the company is closest to:

Select one:

a.

3.94

b.

4.26

c.

4.77

Question 12

Within the context of the constant growth dividend discount model, which of the following would most likely result in an increase in a company's P-E ratio?

Select one:

a.

An increase in the stock's beta.

b.

An increase in growth of dividends.

c.

An increase in the equity risk premium

Question 13.

The method of comparables is based on the "law of one price," which means which of the following?

Select one:

a.

Similar assets should trade at the same multiple.

b.

Similar assets should trade dissimilarly and open alpha opportunities.

c.

Similar assets should be priced similarly.

Question 14

Which of the following statements about free cash flow to equity (FCFE) relative to cash flow from operations (CFO) is untrue?

Select one:

a.

It is calculated as CFO FCInv + Net borrowing.

b.

Theoretically, it is the most suitable definition for free cash flow.

c.

It may be less volatile than CFO.