Finance Objective

Question 1.1. If the market multiple is 23.0 and the P/E ratio of a company is 27.4, then the stock's relative P/E is (Points : 1)

Question 2.2. When an investor multiplies future estimated earnings per share by a price/earnings ratio to compute the value of a stock that investor is using the price/earnings approach to valuation. (Points : 1)

Question 3.3. A relative P/E ratio greater than 1 indicates that a company may be undervalued. (Points : 1)

Question 4.4. Markhem Enterprises is expected to earn $1.34 per share this year. The company has a dividend payout ratio of 40% and a P/E ratio of 18. What should one share of common stock in Markhem Enterprises be selling for in the market? (Points : 1)

Question 5.5. Lindell, Inc. has 8% , $100 par value preferred stock outstanding. To earn 12% on an investment in this stock, you need to purchase the shares at a per share price of (Points : 1)

Question 6.6. Which of the following contributes to high P/E ratios (Points : 1)

Question 7.7. Which one of the following is a correct equation to calculate earnings per share? (Points : 1)

Question 8.8. A company has an annual dividend growth rate of 5% and a retention rate of 40%. The company's dividend payout ratio is (Points : 1)

Question 9.9. The common stock of Jennifer's Furniture Outlet is currently selling at $32.60 a share. The company adheres to a 60% dividend payout ratio and has a P/E ratio of 19. There are 21,000 shares of stock outstanding. What is the amount of the annual net income for the firm? (Points : 1)

Question 10.10. Which one of the following is is most likely to increase the price of a stock? (Points : 1)

Question 11.11. Over the last year, a firm's earnings per share increased from $1.20 to $1.40, its dividends per share increased from $0.50 to $0.60, and its share price increased from $21 to $24. The firm maintained a relative P/E of 1.10 over the entire time period. Given this information, it follows that the (Points : 1)

Question 12.12. The rate of growth can exceed the required return during the variable-growth period without invalidating the variable growth dividend valuation model. (Points : 1)

Question 13.13. Generally speaking, the higher the Price-to-Sales ratio, the better. (Points : 1)

Question 14.14. The intrinsic value of a zero-growth stock is simply the capitalized value of its annual dividends. (Points : 1)

Question 15.15. The price of a stock with a low relative P/E will tend to be more volatile than the price of a stock with a high relative P/E. (Points : 1)

Question 16.16. Michelak's Maritime Industries has relatively stable earnings and pays an annual dividend of $2.50 per share. This dividend has remained constant over the past few years and is expected to remain constant for some time to come. If you want to earn 12% on an investment in the common stock of Michelak's, how much should you pay to purchase each share of stock? (Points : 1)

Question 17.17. Generally speaking, the higher the Price-to-Sales ratio, the better. (Points : 1)

Question 18.18. P/E ratios could rise even as earnings fall if (Points : 1)

Question 19.19. Most stocks trade at five to seven times their book values. (Points : 1)

Question 20.20. In general, the higher the retention ratio (Points : 1)

Question 21.21. The intrinsic value of an asset equals the present value of all future cash flows at a given discount rate. (Points : 1)

Question 22.22. As a company's beta rises, the required return on the stock should fall, all other things being equal. (Points : 1)

Question 23.23. One of the easiest aspects of the dividend valuation model (DVM) is specifying the appropriate growth rate for a firm's dividends over time. (Points : 1)

Question 24.24. The required rate of return denotes the minimum rate of return an investor should expect. (Points : 1)

Question 25.25. James is willing to settle for a 10% rate of return on EG stock at a time when investors, on average, are requiring an 11% rate of return on the same stock. Which of the following will happen? (Points : 1)

Question 26.26. The major forces behind earnings per share are (Points : 1)

Question 27.27. GLOO stock's P/E ratio is 45 at a time when the market's P/E ratio is 15. GLOO's realtive P/E ratio is (Points : 1)

Question 28.28. Which of the following statements concerning the constant-growth dividend valuation model is (are) correct?  (Points : 1)

Question 29.29. The constant growth dividend valuation model works best for mature companies with a long record of paying dividends. (Points : 1)

Question 30.30. Which of the following contributes to high P/E ratios (Points : 1)