R50_Equity_Valuation_Concepts_and_Basic_Tools_Q_Bank.pdf - Equity Valuation Concepts and Basic Tools Question Bank www.ift.world LO.a Evaluate whether a

R50_Equity_Valuation_Concepts_and_Basic_Tools_Q_Bank.pdf -...

This preview shows page 1 - 3 out of 20 pages.

Equity Valuation: Concepts and Basic Tools Question Bank Copyright © IFT. All rights reserved. Page 1 LO.a: Evaluate whether a security, given its current market price and a value estimate, is overvalued, fairly valued, or undervalued by the market. 1.A given stock is trading at $36.81. An analyst estimates its intrinsic value as $38.25. According to the analyst the stock is mostlikely : A.undervalued. B.overvalued. C.fairly valued. 2.You are evaluating a security which is actively traded and followed by many analysts. Based on your model you arrive at an intrinsic value which is much lower the then current market prices. The sensible course of action will be to: 3.If an investor changes his investment horizon from 10 years to 20 years, what will it do to the stock’s intrinsic value, keeping all other factors constant? 4.Peter Lynch determines the intrinsic value of an equity security to be less than its current market value. Lynch believes that the equity is mostlikely : 5.A decrease in the dividend payout ratio will most likelydecrease the intrinsic value when using a(n): A.multiplier model. B.asset-based valuation model. C.present value model. 6.An analyst is estimating intrinsic value of an equity security. To do so, he has constructed a model which projects cash flows over the next several years. Which of the following models is he most likelyusing? LO.c: Explain the rationale for using present value models to value equity and describe the dividend discount and free-cash-flow-to-equity models.
Image of page 1
Equity Valuation: Concepts and Basic Tools Question Bank Page 2 7.Free cash flow to equity is calculated as: 8.Which of the following statements is mostaccurate? A firm’s free-cash-flow-to-equity (FCFE): A.is not a measure of the firm’s dividend-paying capacity. B.increases with an increase in the firm’s net borrowing. C.is significantly affected by the amount of dividends paid by the firm.
Image of page 2
Image of page 3

You've reached the end of your free preview.

Want to read all 20 pages?

  • Fall '18
  • ASEL
  • CFA, Dividend yield, P/E ratio

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture