14 - Name Chapter 14--Valuation: Market-Based Approaches...

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Unformatted text preview: Name Chapter 14--Valuation: Market-Based Approaches Description Instructions Modify Add Question Here Question 1 Multiple Choice 0 points Modify Remove Question The market-to-book ratio is calculated by Answer dividing a firm's market value of total equity by the book value of total equity. dividing a firm's market value of common equity by the book value of total equity. dividing a firm's market value of common equity by the book value of common equity. dividing a firm's market value of total equity by the book value of total debt. Add Question Here Question 2 Multiple Choice 0 points Modify Remove Question The market price of a share of common equity reflects Answer the aggregated expectations of all of the market participants following that particular stock. the present value of future residual income. book value plus the present value of future residual income. the correct value for the particular stock. Add Question Here Question 3 Multiple Choice 0 points Modify Remove Question Valuation using market multiples captures Answer absolute valuation per dollar of book value or per dollar of earnings. dollar of book value or dollar of earnings per dollar of common equity. relative valuation per dollar of book value or per dollar of earnings. intrinsic valuation per dollar of book value or per dollar of earnings. Add Question Here Question 4 Multiple Choice 0 points Modify Remove Question Under the value-to-book model a firm in steady state equilibrium earning ROCE = R E will Answer create additional shareholder wealth and be valued above book value. maintain shareholder wealth and be valued at book value. destroy shareholder wealth and be valued below book value. be in a no growth state. Add Question Here Question 5 Multiple Choice 0 points Modify Remove Question Under the value-to-book model new projects will be abnormally profitable only when Answer ROCE equals ROA ROCE equals R E ROCE is greater than R E ROCE is less than R E Add Question Here Question 6 Multiple Choice 0 points Modify Remove Question Companies value-to-book and market-to-book ratios may differ due to accounting reasons. An example of an accounting reason that would create a difference is Answer accelerated methods of depreciation. successful research and development programs. using LIFO versus FIFO for inventory. high operating leverage. Add Question Here Question 7 Multiple Choice 0 points Modify Remove Question One problem with the price-earnings ratios commonly reported is that Answer it divides share price, which reflects the present value of future earnings by historical earnings. it divides share price, which reflects the present value of book value by historical earnings. it does not take into consideration the present value of future earnings....
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14 - Name Chapter 14--Valuation: Market-Based Approaches...

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