corporate finance

A benchmark PE ratio can be determined using:

- the PEs of similar companies a company's own historical PEs - a company's own historical PEs

which of the following are expected cash flows to investors in stocks

dividends and capital gains

the constant growth model infers that

dividends change at a constant rate

which of the following are reasons why it is more difficult to value common stock than it is to value bonds:

- the rate of return required by the market is not easily observed - the life of a common stock is essentially forever - common stock cash flows are not known in advance

The _________ can be interpreted as the capital gains yield

constant growth rate

All else constant, the dividend will increase if the stock price

decreases

A PE ratio that is based on estimated future earnings is known as a _______________ PE ratio

foward

An assets value is determined by the present value of its _____ cash flows

future

one requirement of the dividend growth model is:

g < R

when the stock being valued does not currently pay dividends,

the dividend growth model can still be used based on the future dividends