A stock that is considered to be a good income stock would satisfy which of the following conditions?
a. earnings growth rate greater than the Treasury bill yield
b. earnings growth rate less than the Treasury bill yield
c. dividend yield greater than the Treasury bill yield
d. dividend yield less than the Treasury bill yield
Interest rates have fallen to 30-year lows. Stock analysts should expect that
a. firms have increased long?term debt and decreased short?term debt
b. firms have decreased long?term debt and decreased short?term debt
c. firms have decreased long?term debt and increased equity
d. firms have increased long?term debt and increased equity
If a firm has had a total asset turnover of 4.0 and a net profit margin of 15%. Which of the following is most likely to occur if the firm’s has an increase in unsold inventory and must lower the price to clear the inventory?(TAT: Total Asset Turnover)
a. TAT = 5.0 and NPM = 20%
b. TAT = 5.0 and NPM = 10%
c. TAT = 3.0 and NPM = 20%
d. TAT = 3.0 and NPM = 10%
In any given 10-year period, the majority of the returns come
a. evenly over the decade
b. every other year
c. in a ten-month period
d. in a two-month period
You think interest rates will fall in the next few years because the economy is starting to slow and could enter a recession. How should you invest?
a. AAA bonds
b. Junk bonds
c. Cyclical stocks
d. Technology stocks
When investors find a stock that is a good value, what happens?
a. investors bid down the price and the expected return falls
b. investors bid down the price and the expected return rises
c. investors bid up the price and the expected return falls
d. investors bid up the price and the expected return rises
You are trying to evaluate a small company that does not have a lot of financial information available. You find the following information about the company and some similar firms.
What discount rate should you use?
Your firm has sales of $50 million, EPS of $7.5 million
Firm A has sales of $150 million, EPS of $18 million, required return of 17%
Firm B has sales of $200 million, EPS of $33 million, required return of 15%
Firm C has sales of $1100 million, EPS of $145 million, required return of 13%
a. You should use a discount rate of less than 13%
b. You should use a discount rate between 13% and 15%
c. You should use a discount rate between 15% and 17%
d. You should use a discount rate of more than 17%