1. A goal of an equity analysis is to find securities __________.
A. whose estimated value, based on your expectations about future cash flows, growth rates and required rates of return, exceeds the current market price
B. with a negative present value of growth opportunities
C. with high market capitalization rates
D. all of the above
2. Several key points in the article "Constructing Winning Stock Screens" are:
A. Stock screens should be used to limit or narrow the universe of stocks for further valuation analysis.
B. Screening is merely the first step (a starting point) in the security analysis process.
C. A good screening system contains both primary and secondary criteria.
D. All of the above
3. The Gordon Growth single-stage version of DDM is best suited for dividend paying firms where the dividends are growing at a rate that is _________ the nominal growth in the overall economy and that have established a _________ dividend payout policy that you expect will continue in the future.
A. ten times greater than; constant
B. comparable to or less than: constant
C. greater than; variable
D. less than; variable
4. You have been asked to use the two-stage DDM to estimate the value per common share of Sundanci, Inc. You expect that Sundanci’s earnings and dividends grow at 12% for two years and at 4% thereafter. Estimate the current value per share given that: The required return on equity = 8%; E(0) = current Earnings per share = $1.95 per share; D(0) = current dividend per share (the dividend just paid) = $.90 per share.
A. $33.12
B. $27.07
C. $25.17
D. $13.32