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- Share Price can be determined by the cash flows and risk. Assume other things held constant, increased in risk will result in a. a lower share prices b. a higher share prices c. unchanged share price d. an undetermined share pricesThe cost of preferred stock: a. is equal to the dividend yield b. is independent of the stock's price c. is equal to the YTM d. depends on dividend's growth rateDefine the terms covariance and correlationcoefficient. How are they related to one another,and how do they affect the required rate of returnon a stock? Would correlation affect its requiredrate of return if a stock were held (say, by the company’s founder) in a one-asset portfolio?
- Which statement is false regarding the Capital Asset Pricing Model? A. The beta coefficient of a stock is constant. B. The risk free rate is usually based on the treasury bill yield. C. Market risk premium is the difference between market return and the risk free rate. D. The cost of retained earnings is equal to the cost of new shares issued.a. What is the relationship between the expected return of a stock and its fair expected return? When is a stock underpriced, overpriced, or fairly priced?For the following stock investment, find (a) the total purchase price, (b) the total dividend amount, (c) the capital gain or loss, (d) the total return, and (e) the percentage return. Ignore broker and SEC fees. (a) What is the total purchase price? $ (b) What is the total dividend amount? (c) What is the capital gain or loss? (d) What is the total return on investment? (e) What is the percentage return? (Round to the nearest percent.) Number of shares Purchase price per share Dividend per share Sale price per share 70 $40 $2 $82
- Apart from using PE ratio, what is another way of valuing the stock price? if we have the EPS, Share Price, Dividend Per Share, ROE and the discount rate (R). And what are the assumptions and the limitations of this model? Is it the PEG ratio or not??Explain how holding a portion of the earnings (Plowback ratio) could increases the stock price.The expected return on a stock is called the __ from the investor's perspective, and the __ from the company's perspective. A. required return; cost of equity B. required return; cost of capital C. excess return; cost of equity D. excess return; cost of capital
- Explain the difference between expected rate of return, required rate of return, and historical rate of return when applied to common stock.Is the debt level that maximizes a firm’s expected EPS the same as the debt level that maximizesits stock price? Explain.Define the following terms. Basic earnings per share. Potentially dilutive security. Diluted earnings per share.