20.
C)
Question #85 of 120 Question ID: 1146173Pat McCoy, CFA, is analyzing a technology firm that has experienced annual earnings growth of 12%. McCoy does not
expect the firm to begin paying dividends on its common shares in the foreseeable future. To estimate the value of this
firm's common shares, McCoy should most appropriately use:
A)
a two-stage DDM.
B)
a free cash flow model.
a Gordon growth model.
Question #86 of 120 Question ID: 1146170Over the past few years, the companies in an industry have experienced positive but decreasing profitability and growth
rates. The companies have begun to compete intensely with each other and customers switch frequently among brands.
This industry's life-cycle stage is most accurately described as:
growth.
maturity.
shakeout.
Question #87 of 120 Question ID: 1146177An analyst gathered the following data about a company:
The historical earnings retention rate of 40% is projected to continue into the future.
The sustainable ROE is 12%.
The expected market return is 11%.
If the analyst believes next year's earnings will be $4 per share, what value should be placed on this stock?
$22.24.
$33.32.
$45.45.
Question #88 of 120 Question ID: 1146167Which of the following classifications of firms is least likely to comprise cyclical firms?
Housing.
Technology.
Telecommunications.
Question #89 of 120 Question ID: 1146162The assertion that investors, analysts, and portfolio managers exhibit psychological tendencies that cause them to make
systematic errors is most consistent with:
behavioral finance.
weak-form market efficiency.
fundamental analysis.
Question #90 of 120 Question ID: 1146157An investor purchases 1,000 shares of each of the stocks in a price- weighted index at their closing prices (ignore
transactions costs). On a total return basis, if the index stocks remain the same, this portfolio will most likely:
perform exactly like the index over time.
outperform the index over time.
underperform the index over time.
Question #91 of 120 Question ID: 1146178Among valuation models, the difficulty of estimating a required rate of return is most likely to be a disadvantage of using:
an asset-based valuation model.
an enterprise value multiplier model.
Question #92 of 120 Question ID: 1146164An investor owns preference shares which stipulate that any dividend for the current period, as well as all past dividends,
must be fully paid before a common stock dividend may be paid. This security is best described as:
full-pay preferred.
restricted preferred.
cumulative preferred.
Question #93 of 120 Question ID: 1146153The primary capital market involves the sale of:
new issues of securities, which are typically distributed
by a specialist.
by an underwriter.
existing issues of securities, which are typically
distributed by an investment bank.
Question #94 of 120 Question ID: 1146182
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