Ntu Career

Score: 120 out of 120 points (100%) 1. award: 10 out of 10 points Which of the following valuation measures is often used to compare firms which have no earnings? Price-to-book ratio P/E ratio Price-to-cash flow ratio Price-to-sales ratio 2. award: 10 out of 10 points When Google’s share price reached $475 per share Google had a P/E ratio of about 68 and an estimated market capitalization rate of 11. 5%. Google pays no dividends. What percentage of Google’s stock price was represented by PVGO? 92% 87% 77% 64% 3. award: 10 out of 10 points A firm is expected to produce earnings next year of $3. 00 per share.

It plans to reinvest 25% of its earnings at 20%. If the cost of equity if 11%, what should be the value of the stock? $27. 27 $50. 00 $66. 67 $70. 00 g = . 25 x . 20 = . 05; P = 3. 0/(. 11 – . 05) = 50. 00 4. award: 10 out of 10 points The free cash flow to the firm is reported as $198 million. The interest expense to the firm is $15 million. If the tax rate is 35% and the net debt of the firm increased by $20 million, what is the market value of the firm if the FCFE grows at 3% and the cost of equity is 14%? $1,893 billion $1,893 billion $2,497 billion $2,585 billion $3,098 billion FCFE = 198 – 15(1 – . 35) + 20 = 208. 5. Value = 208. 25/(. 14 – . 03) = 1893. 5. award: 10 out of 10 points If a firm has a free cash flow equal to $50 million and that cash flow is expected to grow at 3% forever, what is the total firm value given a WACC of 9. 5%? $679 million $715 million $769 million $803 million Total value = 50/(. 095 – . 03) = 769. 23 6. award: 10 out of 10 points A firm has a stock price of $54. 75 per share. The firm’s earnings are $75 million and the firm has 20 million shares outstanding. The firm has an ROE of 15% and a plowback of 65%. What is the firm’s PEG ratio? 1. 50 1. 25 1. 10 1. 00 7. award: 10 out of 10 points

Ace Frisbee Corporation produces a good that is very mature in their product life cycles. Ace Frisbee Corporation is expected to pay a dividend in year 1 of $3. 00, a dividend in year 2 of $2. 00, and a dividend in year 3 of $1. 00. After year 3, dividends are expected to decline at the rate of 2% per year. An appropriate required return for the stock is 8%. Using the multistage DDM, the stock should be worth __________ today. $13. 07 $13. 58 $18. 25 $18. 78 8. award: 10 out of 10 points Caribou Gold Mining Corporation is expected to pay a dividend of $4 in the upcoming year. Dividends are expected to decline at the rate of 3% per year.

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