Week 5 - Case Study

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Case Study #3: Chapter 6 Business Analysis -  A business can be valued by capitalizing its earnings stream (see example 6.15).  How might you use the same idea to value securities, especially the stock of large publicly held companies? Is there a way to calculate a value that could be compared to the stock’s market price that would tell an investor whether it’s a good buy? (If the market price is lower than the calculated value, the stock is a bargain.)  What financial figures associated with shares of stock might be used in the calculation. Consider the per share figures and ratios discussed in chapter 3 including EPS, dividends, book value per share, etc.  Does one measure make more sense than the others? What factors would make a stock worth more or less than your calculated value?

Answer quickly please The _________ is the internal rate of return a firm must earn on its investment in order to maintain the market value of its stock. a. IRR b. net profit margin c. Cost of Capital d. gross profit margin

FE1 Show your work for problem solving questions.  If you use one or more sources of information in preparing any answer, provide an APA-style reference, identify any quoted information, and cite a reference wherever it is used.  How would each of the following events change the equilibrium financial market value of a company? (a)an increase in its cost of production; (b) an increase in its cost of financing; (c) an increase in the market’s discount rate; (d) an increase in its sales revenue; and (e) an increase in its projected future profits.

Multiple Choice Questions 1. The following are the factors to be considered in Suitability, except A. Environment B. Capabilities C. Expectations D. Scenarios 2. The ____________ for a firm is the internal rate of return on existing investments, based on real cash flows. A. cash flow return on investment (CFROI) B. Economic Value Added (EVA) C. Total Shareholders Return D. Return on Investment 3. The elements that must be considered in using EVA are as follows, except ___________. A. Reasonableness of earnings B. Appropriate cost of Capital C. Volatility of the market D. None of the above

which one is correct please confirm? QUESTION 30 The dividend ____ states that investors will tend to be attracted to firms that have dividend policies consistent with the investor's objectives.   a. "clientele effect"   b. "informational content"   c. passive residual theory   d. signal

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what is the need to conduct the Solvency Analysis when the liquidity analysis serves the purpose of checking the cash position and liability paying condition of the company? What does PE Ratio tell the investors? Is there any difference between PE ratio, EPS and DPS (Dividend per Share), what insights both ratios provide to the investors? Which category of stakeholders rely on these two ratios? What is the difference between DPS and Dividend Yeild? answer full question please

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which one is correct answer? Q30: ____ determines the ultimate distribution of the firm’s earnings between reinvestment and cash dividend payment to shareholders.   a. Financial expertise   b. Board of Directors’ agreements   c. Dividend policy   d. Management efficiency

which one is correct please confirm? QUESTION 29 The dividend ____ states that investors will tend to be attracted to firms that have dividend policies consistent with the investor's objectives.   a. "informational content"   b. passive residual theory   c. "clientele effect"   d. signal

discuss the critical issues invlove in implementing the dividend growth model approach and the security market line approach in computing  the cost of equity of a firm

31. A primary financial market is one that: A. offers financial assets with the highest expected return B. offers the greatest number of financial assets C. offers financial assets with the highest historical return D. involves the sale of financial assets for the first time 32. Purchasing shares on the Saudi Stock Exchange is an example of: A. a primary market transaction B. companies raising finance from another financial intermediary C. a secondary market transaction D. companies raising new finance

Give typing answer with explanation and conclusion  The primary operating goal of a publicly-owned firm interested in serving its stockholders should be to a. Maximize its expected EPS. b. Minimize the chances of losses. c. Maximize the stock price on a specific target date. d. Maximize its expected total corporate income. e. Maximize the stock price per share over the long run, which is the stock's intrinsic value.

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…

1. Stock exchanges want to be sure that investors have enough information toSelect one:a. Increase a company’s performance and prospectsb. Evaluate a company’s performance and prospectsc. Decrease a company’s performance and prospectsd. Evaluate a company’s assets and liabilities