Chapter 6: Stock Evaluation
In a stock price quote, the ask price is ______ the bid price.
higher than
How to calculate retention ratio?
percent dividend growth rate / ROE
Which of the following are cash flows to investors in stocks? (Select 2) -Dividends -Sale Price -Interest -Fees`
Answer: -Dividends -Sale Price
The increase in earnings is a function of which of the following? -Return on retained earnings -Total Investment -Retained Earnings -Depreciation
Answer: -Return on retained earnings -Retained earnings
A zero-growth model for stock valuation is distinguished by a ____. -zero stock price at year 0 -a constant discount rate -constant dividend amount -negative dividend growth rate
Answer: -constant dividend amount
The constant-growth model assumes that _________. (select 1) -dividends change at a constant rate -debt remains constant -stock prices remain constant
Answer: -dividends change at a constant rate
In a stock price quote, the number of shares outstanding multiplied by the current price per share is known as the ____. -market cap -days ranger -bid price -ask price
Answer: Marker cap
Which method is most helpful when computing the stock price of a non-dividend paying firm with external financing needs? -comparable method -free cash flow method -dividend discount model
-Free cash flow model
All else constant, the dividend yield will increase if the stock price ____. -increase -decrease
Decrease
The value of a firm is the function of its __________________ rate and its _______________ rate.
Growth; Discount
True or False: We can estimate the anticipated return on current retained earnings by using the historical RETURN ON EQUITY
TRUE