If you want to value a firm that consistently pays out its earnings as dividends, the simplest model for you to use is the A) total payout method. B)valuation based on comparable firms. C) dividend-discount model. D) discounted free cash flow model.
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If you want to value a firm that consistently pays out its earnings as dividends, the simplest model for you to use is the A) total payout method. B)valuation based on comparable firms. C) dividend-discount model. D) discounted
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- In your opinion, what is the main problem with the dividend valuation models as compared to the free cash flow valuation model?Explain how to estimate the price per share using the free cashflow valuation model.A measure of profitability analysis is a. times interest earned. b. cash flow per share. c. quick ratio. d. dividend payout ratio. would d be the right answer for this question?
- Which of the following does nor assign a value to a business opportunity using time-value measurement tools? A. internal rate of return (IRR) method B. net present value (NPV) C. discounted cash flow model D. payback period methodIn what circumstances would you choose to use a dividend discount model rather than a free cash flow model to value a firm?In a few sentences, answer the following question as completely as you can. Why should financial decision makers obtain a good estimate of a firm’s cost of capital? What are the consequences of using a discount rate that is higher or lower than a firm’s true required return?
- 7. The internal rate of return (IRR) can best be described as: A. the discount rate at which a set of cash flows have a zero net present value B. the discount rate at which a set of cash flows have a positive net present value c. the rate which the business has to pay to raise finance for an investment the return required by the managers of the business D.1. Which of the following pairs of financial statement analysis tool will be given more emphasis by a firm that is considering whether to grant trade credit or sell on account to a new client? Choices: Current and cash ratio Return on sales and return on asset Debt and debt-to-equity ratio Book value and price-to-earnings ratio 2. It is assumed that the Cost of equity and rate of return are both constant under Walter's Model of Dividend Relevance, if the cost of equity is higher than the rate of return, it is optimal that Choices: No dividend to be given to shareholders None of the choices is correct. The firm is indifferent as to distribute dividends or to reinvest the income All the earnings for the period shall be distributed to shareholders 3. Which of the following is correct with regards to cash discounts offering? Choices: These are granted because customer acquires high quantity of products and goods It is used lengthen the cash conversion cycle without putting pressure…Based on the Liquidity ratio, which ratio determine stability, earning power and capital? Explain the formula and its impact & importance. Choose one only.
- Briefly summarise the findings of Penman and Sougiannis (1998) concerning the ex-post performance of the abnormal earnings method, the dividend discount model and the discounted cash flow method. b) Explain what Business Strategy Analysis is and why it is a prerequisite for understanding the results of our ratio analysis, and for making good forecasts in the context of our Prospective Analysis. c) When making forecasts for the growth rate of FCF (free cash flows) in the posthorizon period, how would you decide what growth rate to choose? What would be the rationale behind a zero growth assumption? d) Imagine that you are comparing the financial performance of two companies using ratio analysis as part of your Financial Analysis. Provide an example of why you need to perform Accounting Analysis first. Your example should describe (in some detail) one of the following: (i) differences in revenue recognition (ii) differences in the recognition of cost of sales (iii) differences in the…Practice : a: The computation of return on average investment ignores one characteristic of the earnings stream, which is considered in discounting cash flows. What is this characteristic? Why is it important? b: What are the disadvantages of evaluating an investment using payback period? Why might a company use this methodology despite these disadvantages?When we compute the EV/EBITDA multiple, i.e. the ratio of Enterprise Value to Earnings Before Interest, Taxes, Depreciation, and Amortization, we estimate the enterprise value of a firm by adding the values of debt and equity and netting out cash. Could you provide a reason for netting out cash? O a. Cash can be used to pay down debt. O b. Cash is easy to value. O c. None of the given answers is correct. The income from cash is not part of EBITDA. Cash is liquid. O d. O e.