Which of the following it true regarding fundamental analysis? involves research

Question

Which of the following it true regarding fundamental analysis? involves research to discover everything about a firm, its business, and its industry Uses data collected on the company to forecast future cash flows Analysts are also referred to as chartists Both a & b All of the above With respect to valuation, stocks and bonds are dissimilar in that bond cash flows are known precisely while stock cash flows are estimates periodic bond interest payments form an annuity while dividends are unlikely to be constant bond cash flows are contractual commitments, stock cash flows are not all of the above The considerations associated with stock valuation do not include: the expected future dividend performance of the stock the estimated selling time and price of the stock the exchange on which the stock is traded the market return on stocks of that type Which of the following is(are) used to develop a stock's intrinsic value? fundamental analysis assumptions about future cash flows technical analysis Both a and b All of the above TOP: Stock Valuation The market value of common stock is primarily based on the firm's future earnings. book value total assets retained earnings. On the assumption that a share of stock will be held for two years and then sold, the formula for determining its current price is: P_0 = D_0 [PVF_k, 0] + D_1[PVF_k, 1] + D_2[PVF_k, 2] + P_2[PVF_k, 2] P_0 = D_0 [PVFA_k, 0] + D_1[PVFA_k, 1] + D_2[PVFA_k, 2] + P_2[PVF_k, 2] P_0 = D_1 [PVF_k, 1] + D_2[PVF_k, 2] + P_2[PVF_k, 2] P_0 = D_0 [FVF_k, 0] + D_1[FVF_k, 1] + D_2[FVF_k, 2] + P_2[PVF_k, 2]

Explanation / Answer

5. Fundamental Analysis involves research to discover everything about a firm, its business and its industry, and uses data collected on the Company to forecast future cash flows. 6. With respect to valuation, stocks and bonds are dissimilar in that bond cash flows are known precisely while stock cash flows are estimates, periodic bond interest payments form an annuity while dividends are unlikely to be constant, and bond cash flows are contractual commitments, stock cash flows are not. 7. The considerations associated with stock valuation do not include the exchange on which the stock is traded. 8. Fundamental analysis and assumptions about future cash flows are used to develop a stock's intrinsic value. 9. The market value of common stock is primarily based on the firm's future earnings. 10. On the assumption that a share of stock will be held for two years and then sold, the formula for determining its current price is Po = D1(PVFk,1) + D2(PVFk,2) + P2(PVFk,2)

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