Session 27

An increase in _________ risk in the market place was a major factor is the latest financial crisis. A) Systematic B) Unsystematic C) Interest rate D) Reinvestment E) Inflation

A

In the long run, stock returns are influenced by growth in _________. A) Earnings B) Interest rates C) Inflation D) Risk E) Supply and demand

A

The value of a company is equal to the present value of its expected future cash flows, discounted for timing and risk. A) True B) False

A

Using a higher risk-free rate in your WACC calculation will yield a lower value in a discounted cash flow analysis. A) True B) False

A

Which of the following would NOT increase the intrinsic value of a Stock with all else constant? A) Higher working capital as a % of sales B) Higher Revenue Growth Rate C) Lower Beta D) Lower risk free interest rate E) Lower Tax Rate

A

Discounted cash flow is a type of ______ analysis. A) Modern portfolio theory B) Fundamental C) Technical D) Capital markets E) Interest rate

B

The value of a stock is equal to the present value of its earnings. A) True B) False

B

True or False: If a company's earnings are in line with expectations, the stock price will increase significantly. A) True B) False

B

True or False: With all fundamentals the same, a tech company will have a higher valuation than a non-tech company. A) True B) False

B

Who determines the stock price of a company? A) Management B) Board of Directors C) Investment Banks D) The Market E) The Government

B

Who would be most likely to value a stock based on the Discounted Cash Flow valuation technique? A) Technical Analyst B) Fundamental Analyst C) Day Trader D) All of the Above E) None of the Above

B

In a WACC calculation, which of the following measures risk? A) Risk free rate B) Market return C) Beta D) CAPM E) Debt to equity ratio

C

Which of the following is NOT necessary to project free cash flow to the firm? A) Revenue Growth B) Operating Profit Margin C) Beta D) Working Capital Investment E) Tax Rate

C

_________ analysis tends to be more a short-term trading approach to buying and selling stocks. A) Modern portfolio theory B) Fundamental C) Technical D) Discounted cash flow E) Cost of capital

C

Given the following, calculate the intrinsic value per share of Company XYZ's stock: Corp. Value - $26 million Bonds Outstanding - $10 million ST Liabilities - $350 thousand LT Growth Rate - 6% Beta - 1.2 Shares Outstanding - 1.5 million A) $24.23 B) $17.33 C) $11.06 D) $10.43 E) $12.52

D

Which is definitely true regarding stock valuation? A) If interest rates decline and risk increases, the value of a stock will increase B) If expectations of future cash flows decline and risk decreases, the value of a stock will decrease C) If expectations of future cash flows increase and interest rates rise, the value of a stock will increase D) If risk increases and interest rates rise, the value of a stock will decrease E) If risk decreases and interest rates fall, the value of a stock will decrease

D

Which of the following would cause a stock's price to increase? A) Company ABC losing $10 million in the quarter versus expectations of a $5 million loss B) Company ABC reporting a revenue growth rate of 10%, in line with expectations C) Company ABC reporting an operating profit margin of 15% versus expectations of 20% D) Company ABC losing $5 million in the quarter versus expectations of a $10 million loss E) Company ABC reporting an operating profit margin of 10%, in line with expectations

D

Which would stock would be the best buying opportunity? Stock A: intrinsic value - $40, price - $45 Stock B: intrinsic value - $60, price - $40 Stock C: intrinsic value - $100, price - $90 Stock D: intrinsic value - $40, price - $20 Stock E: intrinsic value - $40, price - $60 A) Stock A B) Stock B C) Stock C D) Stock D E) Stock E

D

With all else constant, which would result in a lower intrinsic value per share of a company's stock? A) Lower Market Risk Premium B) Lower Investment as % of Revenue C) Higher Revenue Growth D) Lower Profit Margins E) Lower Risk Free Rate

D

Which of the following is NOT a step in discounted cash flow valuation? A) Forecast expected cash flows B) Estimate the discount rates C) Calculate the enterprise value of a company D) Calculate the per share price of a stock E) Estimate the current ratio

E