True or False - The mean-reverting behavior of sales growth and return on equity that is demonstrated by the broader market can be applied to all companies in that market.
True or False - The Discounted Dividend method of valuation is based on the premise that a company's value can be determined by the present value of future dividends (including any liquidating dividends).
True or False - Abnormal Earnings arise when a company is able to produce earnings that exceed the expected rate of return on equity.
True or False - Accounting analysis and ratio analysis provide only a superfluous understanding of a company's current performance and should not, therefore, be relied upon as reliable indicators of continued performance.
*** References would be great too, I cannot find a CONFIRMED answer for these 4 questions*** TYou
True or False - The mean-reverting behavior of sales growth and return on equity that is demonstrated by the broader market can be applied to all companies in that market.
True or False - The Discounted Dividend method of valuation is based on the premise that a company's value can be determined by the present value of future dividends (including any liquidating dividends).
True or False - Abnormal Earnings arise when a company is able to produce earnings that exceed the expected rate of return on equity.
True or False - Accounting analysis and ratio analysis provide only a superfluous understanding of a company's current performance and should not, therefore, be relied upon as reliable indicators of continued performance.
*** References would be great too, I cannot find a CONFIRMED answer for these 4 questions*** TYou
Related questions
True or False: It is free for a company to raise money through retained earnings, because retained earnings represent money that is left over after dividends are paid out to shareholders.
True
False
Points:
Close Explanation
Explanation:
The current risk-free rate of return is 3.80% and the current market risk premium is 6.10%. Blue Hamster Manufacturing Inc. has a beta of 1.56. Using the Capital Asset Pricing Model (CAPM) approach, Blue Hamsterâs cost of equity is selector 1
13.99%
14.65%
13.32%
17.32%
.
Points:
Close Explanation
Explanation:
Fuzzy Button Clothing Company is closely held and, as a result, cannot generate reliable inputs for the CAPM approach. Fuzzy Buttonâs bonds yield 10.20%, and the firmâs analysts estimate that the firmâs risk premium on its stock relative to its bonds is 3.50%. Using the Bond-Yield-plus-Risk-Premium approach, the firmâs cost of equity is selector 1
13.01%
17.13%
13.70%
15.07%
.
Points:
Close Explanation
Explanation:
The stock of Cute Camel Woodcraft Company is currently selling for $25.67, and the firm expects its dividend to be $1.38 in one year. Analysts project the firmâs growth rate to be constant at 7.20%. Using the discounted cash flow (DCF) approach, Cute Camelâs cost of equity is estimated to be...
16.98%
13.21%
12.58%
11.95%
.
Points:
Close Explanation
Explanation:
It is often difficult to estimate the expected future dividend growth rate for use in estimating the cost of existing equity using the DCF approach. In general, there are three available methods to generate such an estimate:
| ⢠| Carry forward a historical realized growth rate, and apply it to the future. |
| ⢠| Locate and apply an expected future growth rate prepared and published by security analysts. |
| ⢠| Use the retention growth model. |
Suppose Cute Camel Woodcraft Company is currently distributing 70.00% of its earnings in the form of cash dividends. It has also historically generated an average return on equity (ROE) of 12.00%. Cute Camel Woodcraft Companyâs estimated growth rate is...
11.70%
3.60%
12.30%
42.00%
.
