Name Don\'t forget dollar signs (Sl and percentages(3I You will lose 5 points fo
ID: 2787567 • Letter: N
Question
Name Don't forget dollar signs (Sl and percentages(3I You will lose 5 points for each mssing one For short answers read the instructions given. For problems show all of your work on this exam. Clearly indicate your answers. Partial Credt may be given fall work is shown. Zero credit correct, Good luck! will be given if no work is shown evenif your answer i Part 1, True (T) or False (F), 52 points, 2 points each. Put your answers in the column to the right 1. Given the relationship between P-E and expected growth, you would expect that Tesla stock would have 2. Company A has a stock price of $10 and a market capitalization of $100 bilion. Company B has a stock a higher P-E than Target stock price of $100 and a market capitalization of $10 billion. This means that Company 8 is worth more than Company A. required return of 8%. Company A must have the higher indend red dividend yield of 7%, Stock A must have a higher required return 3. | Company A has a growth rate of 5% and Company B has a growth rate of 6%. Both companies have a 4. | Stock A has a constant growth rate of 2% and Stock B has constant growth rate of 5%. Both stocks have a S. The capital gains yield can never be negative. 6. The dividend growth rate can never be zero. 7. Bonds represent ownership in a firm, stocks do not 8. According to the constant dividend growth model, the capital gains yield is the same as the dividend growth rate 9. Bonds mature, stocks do not. 10. High P-E ratios are usually associated with high-growth stocks. 11· Stocks are generally less risky than bonds. 12. According to the constant dividend growth model, the dividend yield is the same as the capital gains 13. 14, 15. The value of a share of stock is equal to the future value of the dividend payments plus the future price Cash flows to stockholders are promised, cash flows to bondholders are not The dividend yield must always be positive. 16. The value of a share of stock is equal to the price plus the future value of the dividends 17 stock that does not pay dividends MUST have a lower price than a stock that pays dividends. 18. The dividend yield can never be negative. 19-1 The value of a share of stock is equal to the present value of all future cash flows related to the stock 20. The TOTAL value of a company's stock is equal to the price per share times the number of shares outstanding. 21. According to the constant dividend growth model, the constant growth rate is the same as the dividend 22. A stock with a P-E of 20 and a PEG of 1 is a better value than a stock with a P-E of 1 and a PEG of 20.Explanation / Answer
2. This statement is false. One can see that the market capitalization of company A is more than the market capitalization of company B, so company A is more worth than company B despite stock price of company B is 10 times the stock price of company A.
3. The dividend yield of company B will be higher than the dividend yield of company A as the growth rate is higher for company B and the dividends will be higher for company B making the dividend yield higher.
Dividend yield = dividend per share/price per share
Hence statement is false.
Please post other questions separately, thanks.
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