1. Which of the following statements regarding intrinsic value and market price is true If intrinsic value is greater than the current market price, the stock should be avoided or, if already held, sold
If intrinsic value is less than the current market price, the stock is undervalued
If intrinsic value is equal to the current market price, the stock is correctly valued
If the intrinsic value is greater than the current market price, the stock is considered speculative
2. A major difference between the dividend discount model (DDM) and the free cash flow to equity model (FCFE) is that the FCFE :
accounts for potential capital gains and the DDM does not
measures what a firm could pay out in dividends and the DDM measures what is actually paid
measures both dividend growth and stability and the DDM only measures the dividend growth
bases its calculations on future value techniques while the DDM uses present value calculations