.
Multiple Choice Questions
1. ________ is equal to the total market value of the firm's common stock
divided by (the replacement cost of the firm's assets less liabilities). A) Book value per share B) Liquidation value per share C) Market value per share D) Tobin's Q E) None of the above.
Answer: D Difficulty: Easy Rationale: Book value per share is assets minus liabilities divided by
number of shares. Liquidation value per share is the amount a shareholder would receive in the event of bankruptcy. Market value per share is the market price of the stock.
2. High P/E ratios tend to indicate that a company will _______, ceteris
paribus. A) grow quickly B) grow at the same speed as the average company C) grow slowly D) not grow E) none of the above
Answer: A Difficulty: Easy Rationale: Investors pay for growth; hence the high P/E ratio for growth
firms; however, the investor should be sure that he or she is paying for expected, not historic, growth.
3. _________ is equal to (common shareholders' equity/common shares
outstanding). A) Book value per share B) Liquidation value per share C) Market value per share D) Tobin's Q E) none of the above
Answer: A Difficulty: Easy Rationale: See rationale for test bank question 18.1
精品
.
4. ________ are analysts who use information concerning current and
prospective profitability of a firms to assess the firm's fair market value. A) Credit analysts B) Fundamental analysts C) Systems analysts D) Technical analysts E) Specialists
Answer: B Difficulty: Easy Rationale: Fundamentalists use all public information in an attempt to
value stock (while hoping to identify undervalued securities).
5. The _______ is defined as the present value of all cash proceeds to the
investor in the stock. A) dividend payout ratio B) intrinsic value C) market capitalization rate D) plowback ratio E) none of the above
Answer: B Difficulty: Easy Rationale: The cash flows from the stock discounted at the appropriate
rate, based on the perceived riskiness of the stock, the market risk premium and the risk free rate, determine the intrinsic value of the stock.
6. _______ is the amount of money per common share that could be realized
by breaking up the firm, selling the assets, repaying the debt, and distributing the remainder to shareholders. A) Book value per share B) Liquidation value per share C) Market value per share D) Tobin's Q E) None of the above
Answer: B Difficulty: Easy Rationale: See explanation for test bank question 18.1.
精品
.
7. Since 1955, Treasury bond yields and earnings yields on stocks
were_______. A) identical B) negatively correlated C) positively correlated D) uncorrelated
Answer: C Difficulty: Easy Rationale: The earnings yield on stocks equals the expected real rate of
return on the stock market, which should be equal to the yield to maturity on Treasury bonds plus a risk premium, which may change slowly over time. The yields are plotted in Figure 18.8.
8. Historically, P/E ratios have tended to be _________. A) higher when inflation has been high B) lower when inflation has been high C) uncorrelated with inflation rates but correlated with other
macroeconomic variables
D) uncorrelated with any macroeconomic variables including inflation
rates
E) none of the above
Answer: B Difficulty: Easy Rationale: P/E ratios have tended to be lower when inflation has been high,
reflecting the market's assessment that earnings in these periods are of \warranting lower P/E ratios.
9. The ______ is a common term for the market consensus value of the required
return on a stock. A) dividend payout ratio B) intrinsic value C) market capitalization rate D) plowback rate E) none of the above
Answer: C Difficulty: Easy Rationale: The market capitalization rate, which consists of the risk-free
rate, the systematic risk of the stock and the market risk premium, is the rate at which a stock's cash flows are discounted in order to determine intrinsic value.
精品
投资学第7版TestBank答案
