Dividends measure the cash that ____________________ ultimately receive from investing in an equity share Implementing a dividend valuation model to determine the value of the common shareholders' equity requires an analyst to measure three elements

1. Dividends measure the cash that ____________________ ultimately receive from investing in an equity share

investors

2. Implementing a dividend valuation model to determine the value of the common shareholders' equity requires an analyst to measure three elements. What are the three elements that the analyst needs to measure?

1. The discount rate used to compute the present value of the future dividends.

2. The expected future dividends over the forecast horizon.

3. The expected dividend at the final period of the forecast horizon, called the continuing dividend, along with a forecast of long-term growth.

3. The conceptual framework for free cash flows separates the balance sheet equation into the following categories:
   a.
   CA + LT A = CL + LT L + SE
   b.
   OA + FA = OL + FL + SE
   c.
   OA + FA = OL + FL + OSE + FSE
   d.
   Non-FA + FA = Non-FL + FL + SE

b.
OA + FA = OL + FL + SE

4. The conceptual framework for free cash flows separates all assets and liabilities into the following categories:
   a.
   Current and non-current
   b.
   Monetary and non-monetary
   c.
   Operating and non-operating
   d.
   Operating and financial

d.
Operating and financial

5. Starting with net cash flow from operations and adjusting for capital expenditures and dividends equals
   a.
   free cash flows for all debt and equity capital stakeholders
   b.
   free cash flow
   c.
   free cash flows to common equity capital shareholders
   d.
   free cash flow from operations

b.
free cash flow

6. When calculating free cash flows to common equity shareholders, financing activities do not include:
   a.
   Debt cash flows
   b.
   Adjustments for capital expenditures
   c.
   Adjustments for Preferred stock cash flows
   d.
   Financial asset cash flows

b.
Adjustments for capital expenditures

7. If an analyst wants to value a potential investment in the common stock equity in a firm, the relevant cash flows the analyst should use are
   a.
   free cash flow from operations
   b.
   free cash flows for all debt and equity capital stakeholders
   c.
   free cash flows to common equity shareholders
   d.
   cash flow from operations

c.
free cash flows to common equity shareholders

8. If an analyst wants to value a potential investment in the net operating assets of a division of another firm, the relevant cash flows the analyst should use are
   a.
   free cash flow from operations
   b.
   free cash flows for all debt and equity capital stakeholders
   c.
   free cash flows to common equity shareholders
   d.
   cash flow from operations

b.
free cash flows for all debt and equity capital stakeholders

9. If an analyst wants to value a potential investment in the common stock equity of a firm, the analyst should discount the projected free cash flows at the
   a.
   required return on equity capital
   b.
   weighted average cost of capital
   c.
   risk free rate
   d.
   market risk premium

a.
required return on equity capital

10. If an analyst wants to value a potential investment in the net operating assets of a division of another firm, the analyst should discount the projected free cash flows at the
    a.
    cost of debt capital
    b.
    cost of equity capital
    c.
    weighted average cost of capital
    d.
    risk free rate

c.
weighted average cost of capital