Chapter 7 - Chapter 7 1 Valuation is the process that links risk and return in order to determine the worth of an asset 2 The value of an asset is

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Chapter 7 1. Valuation  is the process that links risk and return in order to determine the worth of an  asset.  2. The value of an asset is the  present value  of all future cash flows it is expected to provide  over a relevant time period.  3. Risk is generally incorporated into the  discount rate  in the present value model  4. Stocks are difficult to value because the following is information is difficult to accurately  obtain.  All of the above (future dividends, required returns, and future growth rate) 5. The present value of stocks dividends determines the value of the stock.  6. Stock represent  equity 7. The Gordon growth model required that analysts determind  All of the above (a growth  rate, a required return, and next periods dividends).  8. If next periods dividend is $3.00, the required return is 12% and the growth rate is 7%,  what is the firms stock price? 
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This note was uploaded on 11/24/2010 for the course ACCOUNTING FINANCE taught by Professor Ozyge during the Spring '10 term at Rowan.

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Chapter 7 - Chapter 7 1 Valuation is the process that links risk and return in order to determine the worth of an asset 2 The value of an asset is

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