Fundamental Analysis and Stock Essay - 1589 Words

Chapter 9 The Valuation of Stock TRUE/FALSE T 1. The expected return depends on future dividends and future price appreciation. T 2. The dividend-growth valuation model depends on dividends and the required rate of return. F 3. The dividend‑growth model includes both the current and past years dividends. T 4. If the anticipated return exceeds the required rate of return, the investor should buy the stock. F 5. The dividend‑growth model requires that dividends grow annually at the same rate. F 6. A higher beta decreases the required rate of return. T 7. The required rate of return includes the risk‑free rate and a risk premium. T 8. An increase in the risk‑free rate will tend to decrease†¦show more content†¦weak form of the efficient market hypothesis b. semi‑strong form of the efficient market hypothesis c. strong form of the efficient market hypothesis d. all forms of the efficient market hypothesis d 11. A low price to sales ratio suggests a. the firm is generating cash b. the firm has no earnings c. the stock valuation is too high d. the stock may be undervalued b 12. The price to sales ratio may be a preferred analytical tool if a. the firm is not generating cash b. the firm is not generating earnings c. the P/E ratio is too high d. the dividend-growth model suggests the stock is undervalued c 13. Investors may use P/E ratios and price/sales ratios to value stocks. If this analysis is used, which of the following is desirable? a. a high P/E and a low price/sales ratio b. a high P/E and a high price/sales ratio c. a low P/E and a low price/sales ratio d. a low P/E and a high price/sales ratio c 14. If the ratio of price to book exceeds 1.0, a. the stock is overvalued b. the firms assets are understated c. the price of the stock is greater than the accounting value of the firm d. the accounting value of the firm is greater than the market value of the firm PROBLEMS 1. 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