Reading 38: Equity: Concepts and Techniques-LOS b 习题精选 likely, including, following, discounted, 2011

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Session 11: Equity Valuation: Industry and Company Analysis in a Global Context
Reading 38: Equity: Concepts and Techniques

LOS b: Discuss approaches to equity analysis (ratio analysis and discounted cash flow models, including the franchise value model).

 

 

Which of the following is least likely to be characteristic of a firm earning excess risk-adjusted return and its industry?

A) A full flow-through firm.

B) A franchise factor equal to zero.

C) ROE in excess of the required rate of return.

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The higher the franchise factor, the higher the firm valuation. A zero franchise factor is not likely to be associated with a firm earning excess returns. Full flow-through and ROE greater than the required rate of return both raise valuation, other things equal.

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If a firm’s return on equity (ROE) is greater than the rate of return demanded by investors (r), which of the following statements is CORRECT? There is:

A) a high franchise P/E value.

B) potential franchise value.

C) negative franchise value.

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If ROE is greater than r, then there is some benefit in reinvesting the earnings within the firm, therefore, there is potential franchise value.

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Which of the following variables is least likely to be applicable in analyzing the price-to-earnings (P/E) values for a firm?

A) Return on equity.

B) Rate of return demanded by investors.

C) Tax rate.

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The tax rate is not generally applicable in an analysis of P/E values. Presumably, the earnings are already taxed at the firm level. Both remaining variables are important components in the analysis and calculation of P/E values.

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Which of the following statements about the franchise value method is CORRECT?

A) The franchise factor accounts for the required returns from new investments.

B) The firm’s tangible price-to-earnings (P/E) value is the sum of the firm’s intrinsic P/E value and franchise P/E value.

C) The franchise factor accounts for the present value of the excess returns from new investments.

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The intrinsic P/E value is the sum of the tangible P/E value and the franchise P/E value. The franchise P/E can be analyzed as two components: a franchise factor that accounts for the required return from new investments, and a growth factor that accounts for the present value of excess returns from new investments.