The constant growth rate model of the DDM implies that: Which of the following is not one of the reasons two investors both using the constant growth version of the DDM on the same stock might arrive at different estimates of the stock's value? a

1. the stock price grows at the same rate as dividends.

The constant growth rate model of the DDM implies that:

2. They used different expected returns.

Which of the following is not one of the reasons two investors both using the constant growth version of the DDM on the same stock might arrive at different estimates of the stock's value?
a. They used different expected returns.
b. They used different growth rates of dividends.
c. They used different required returns.
d. They assume a different payout ratio.

3. If intrinsic value is equal to the current market price, the stock is correctly valued.

Which of the following statements regarding intrinsic value and market price is true?
a. If intrinsic value is greater than the current market price, the stock should be avoided
or, if already held, sold.
b. If intrinsic value is less than the current market price, the stock is undervalued.
c. If intrinsic value is equal to the current market price, the stock is correctly valued.
d. If the intrinsic value is greater than the current market price, the stock is considered speculative.

4. 15

Analysts often use a ________% rule in security valuation in recognition of the fact that estimating a security's value is an inexact process.

5. a bargain

Based on PSR rule of thumb, if PSR is less than 1, the stock is:

6. IV > CMP

Which of the following situations indicates a signal to buy a stock?
a. IV > CMP
b. IV < CMP
c. IV = CMP
d. Impossible to determine.

7. measures both dividend growth and stability and the DDM only measures the dividend growth

A major difference between the dividend discount model (DDM) and the free cash flow to equity model (FCFE) is that the FCFE:

8. FCFF model

Which of the following models incorporates debt financing, including both the repayment and interest on existing debt as the sale of new debt, as well as preferred stock financing?

9. P/E ratio and EPS

Under the P/E model, stock price is a product of:

10. increase

Generally speaking, if interest rates fall and other factors remain constant, the P/E ratio of most companies company will: