PQ3 - FINA537 Equity Valuation Practice Questions Set 3(No...

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Unformatted text preview: FINA537 Equity Valuation Practice Questions Set 3 (No need to submit) 1. Koller Page 390 Question 1: Compare and contrast the following relative valuation models: P/E Model, PEG Model, P/B Model, V/S Model. 2. On March 11, 1994, the New York Stock Exchange Composite was trading at 16.9 (P /E ) times earnings, and the average dividend yield (D /P ) across stocks on the exchange was 2.5%. The cost of equity for the market is 12.45%. A) If you believe the economy was expected to grow at a rate of 6.09%, what is the appropriate PE ratio (current PE) for the exchange? Based on your belief, do you think the market would go down or up? B) What growth rate in dividends/earnings would justify the PE ratio on March 11, 1994? 3. You are trying to estimate a price per share on an initial public offering of a company involved in environmental waste disposal. The company has a book value per share of $20 and earned $3.50 per share in the most recent time period. While it reinvests $2.50 per share in the most recent period, and the firm uses no debt financing, it has a beta of...
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This note was uploaded on 04/12/2010 for the course FINA 537 taught by Professor Luxiaolei during the Spring '09 term at HKUST.

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PQ3 - FINA537 Equity Valuation Practice Questions Set 3(No...

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