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LOS j: Explain the assumptions and justify the selection of the two-stage DDM, the H-model, the three-stage DDM, or spreadsheet modeling to value a company’s common shares, given the characteristics of the company being valued.
Q1. An analyst has collected the following data on two companies:
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Middle Hickory Co. |
Lower Elm Inc. |
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FCFE |
Negative |
Positive and growing |
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Capital investment |
Significant |
Decreasing |
Which dividend-discount model is the best option for valuing the two companies?
Middle Hickory Lower Elm
A) Two-stage Gordon Growth
B) Three-stage Two-stage
C) Gordon Growth Three-stage
Q2. Which of the following models would be most appropriate for a firm that is expected to grow at 8% for the next three years, and at 6% thereafter?
A) The H-model.
B) A two-stage model.
C) The Gordon growth model.
Q3. The most appropriate model for analyzing a profitable high-tech firm is the:
A) three-stage dividend discount model (DDM).
B) zero growth cash flow model.
C) H-model.
Q4. The three-stage dividend discount model (DDM) allows for an initial period of:
A) high growth, a transitional period of stable growth and a final declining growth phase.
B) stable growth, a transitional period of high growth and a final declining growth phase.
C) high growth, a transitional period of declining growth and a final stable growth phase.
Q5. Which of the following dividend discount models assumes a high growth rate during the initial stage, followed by a linear decline to a lower stable growth rate?
A) Three-stage dividend discount model.
B) H model.
C) Gordon growth model.
Q6. What is the difference between a standard two-stage growth model and the H-model?
A) The H-model assumes a terminal value, while the standard two-stage model does not.
B) The H-model assumes that earnings will dip in the middle of each stage and return to the previous rate by the period's end.
C) In the standard two-stage model, a fixed rate of growth is assumed for each stage, while the H-model assumes a linearly declining rate of growth in one stage.
Q7. Which of the following models would be most appropriate for a firm that is expected to grow at an initial rate of 10%, declining steadily to 6% over a period of five years, and to remain steady at 6% thereafter?
A) The H-model.
B) The Gordon growth model.
C) A two-stage model.
[此贴子已经被作者于2009-3-6 16:33:40编辑过] | 
发表于 2009-3-6 16:32
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