In the Discounted Cash Flow Model (aka. Dividend Valuation Model) for cost of equity, if an asset has no expected dividend, its expected return would be best described as the _________. (A).dividend yield. (B).market risk premium. (C).expected market return. (D).capital gains yield
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In the Discounted Cash Flow Model (aka. Dividend Valuation Model) for
(A).dividend yield.
(B).market risk premium.
(C).expected market return.
(D).
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- Explain how to use the free cash flow valuation model to find the price per share of common equity.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 methodThe capital asset pricing model expresses the cost of equity as a function of a return on riskless assets, a market premium, and: Select one:a. Unsystematic risk.b. None of these.c. The cost of debt.d. Systematic risk.
- The sum of the expected dividend and the expected capital gains yield is called a. Required rate of return b. expected total return c. expected rate of return d. value of the stock e. realized rate of returnThe value of an asset is the present value of the expected returns from the asset during the holding period. An investment will provide a stream of returns during this period, and it is necessary to discount this stream of returns at an appropriate rate to determine the asset’s present value. A dividend valuation model such as the following is frequently used: P = D/ K-g where: P = the current price of Common Stock D = the expected dividend K = the required rate of return on Stock g = the expected constant-growth rate of dividends for Stock a. Identify the three factors that must be estimated for any valuation model and explain why these estimates are more difficult to derive for common stocks than for bondsThe Capital Asset Pricing Model (CAPM) asserts that an asset’s expected return is equal to the risk-free rate plus a risk premium for: a. Volatility b. Systematic risk c. Non-systematic risk d. Diversification e. Marginal utility of consumption
- Make a simple example of the following: a. Capital Gain (or Losses) b. Expected Return c. Real Return d. Risk-free Return e. Required Return f. Holding Period ReturnThis calculation determines profitability or growth potential of an investment, expressed as a percentage, at the point where NPV equals zero. Group of answer choices A. internal rate of return (IRR) method B. net present value (NPV) C. discounted cash flow model D. future value methodThe value of an asset is the present value of the expected returns from the asset during theholding period. An investment will provide a stream of returns during this period, and it isnecessary to discount this stream of returns at an appropriate rate to determine the asset’spresent value. A dividend valuation model such as the following is frequent. where:Pi = the current price of Common Stock iD1 = the expected dividend in Period 1ki = the required rate of return on Stock igi = the expected constant-growth rate of dividends for Stock iA. Identify the three factors that must be estimated for any valuation model, and explain whythese estimates are more difficult to derive for common stocks than for bonds.B. Explain the principal problem involved in using a dividend valuation model to value :(1) companies whose operations are closely correlated with economic cycles.(2) companies that are of very large and mature.(3) companies that are quite small and are growing rapidly.
- according to capm the expected return on equity includes a reward for: a. market risk and specific risk b. Specific risk only c. Time value of money and market risk d. Diversification and portfolio risk e. Time value of money and specific riskThe appropriate benchmark for the return on equity is: A)the weighted average cost of capital. B)the cost of equity. C)the interest free rate. D)none of the above.The two main approaches of equity analysis are: a. The discounted cash flow models and the absolute valuation models. b. The discounted cash flow models and the relative valuation models. c. The rate of return and risk. d. The Price-to-Earnings ratio and the Price-to-Book-Value ratio.
