Submitted by: Submitted by cherry9035
Views: 161
Words: 3263
Pages: 14
Category: Business and Industry
Date Submitted: 10/06/2013 05:40 AM
* Question 1
0 out of 1 points
| |
| An analyst produces the following set of forecasts for Company C.
Year t+1 Year t+2 Year t+3
Net profit $10 $120 $60
Ending book value of net assets $1,030 $1,060 $1,000
Ending book value of net debt $720 $740 $800
At the end of year t, Company C’s book values of net assets and net debt are $1,000 and $700, respectively. The analyst expects that after year t+3 net profit will be $0 and the book values of net assets and net debt will remain constant (i.e., at their year t+3 levels). Company C’s cost of equity is 10%. Under these assumptions, the analyst’s estimate of Company C’s equity value at the end of year t isAnswer | | | |
| Selected Answer: | None of the above |
Correct Answer: | $307.96 |
| | | |
* Question 2
1 out of 1 points
| |
| Consider the following information about three industry peers:
ROE Price to book ratio Price/earnings ratio
Peer 1 20% 0.2 5
Peer 2 10% 1 10
Peer 3 25% 1 5
Which of the following statements about these industry peers is correct?Answer | | | |
| Selected Answer: | Investors expect that the return on equity of the currently best performing peer is not sustainable in the future. |
Correct Answer: | Investors expect that the return on equity of the currently best performing peer is not sustainable in the future. |
| | | |
* Question 3
1 out of 1 points
| |
| An analyst produces the following series of annual dividend forecasts for company A: Expected dividend...