Question8 of 30
Which of the following best describes an advantage of the EV/EBITDA multiple for valuing equity? An advantage is that: it does not require the market value of debt.the multiple must be positive.EBITDA is a proxy for operating cash flow. Question not answeredAn advantage of EBITDA is that it is a proxy for operating cashflow because it excludes Section 5.4Question9 of 30An investor uses the following data and Gordon’s constant growth dividend discount model to evaluate a company’s common stock. To estimate growth, she uses the average of the(1) average value of the compounded annual dividend growth rate over the period of 2006–2011, and(2) dividend payout ratio for the year 2011.YearEarningsperShareDividendper ShareReturnonEquity201120102009200820072006$3.20$3.60$2.44$2.08$2.76$2.25$1.92$1.85$1.74$1.62$1.35$1.2512%17%13%15%11%9%If her required return is 15%, the stock’s intrinsic value is closestto:
CFA Level I “Equity Valuation: Concepts and Basic Tools,” John J. Nagorniak and Stephen E. Wilcox Section 4.2 Question10 of 30An industry characterized by rapidly increasing demand, improving profitability, and falling prices is most likelyin which of the following stages of life cycle? CFA Level I “Introduction to Industry and Company Analysis,” by Patrick W. Dorsey, Anthony M. Fiore, and Ian Rossa O’Reilly Section 22.214.171.124 Question11 of 30An equity index consists of three securities with market information as follows:SecuritySharesOutstandingPrice atBeginning ofPeriodPrice atEnd of PeriodDividend perShareA5,000,000$10.00$9.50$1.00B2,000,000$20.00$21.50$0.80C1,500,000$30.00$33.00$0.60The price-weighted total return index is closestto: 10.7%.6.7%.9.5%. Incorrect. Calculation of Index and Return Based on Price-Weighted Method Security Shares Outstanding BOP Price EOP Price Dividends per Share A 5,000,000 $10.00 $9.50 $1.00 B 2,000,000 $20.00 $21.50 $0.80 C 1,500,000 $30.00 $33.00 $0.60 Total $60.00 $64.00 $2.40 Index value 20.00 21.33 0.80 Type of Index BOP Value EOP Value Return Price return $20.00 $21.33 6.65%
Total return $20.00 $22.13 10.65% BOP = Beginning of period EOP = Ending of period CFA Level I “Security Market Indices,” by Paul D. Kaplan and Dorothy C. Kelly Section 3.2 Question12 of 30Which of the following is mostlikely associated with secondary capital markets?
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- Fall '13
- Stephen E. Wilcox, John J. Nagorniak