Exam 3 practice problems Flashcards
Components of the CAPM include
the rate on a risk free security
A beta coefficient for a risky stock is
greater than 1
t/f A beta of 1 indicates that the stock’s price is stable
False
t/f The numerical value of a stocks beta tends to be stable over time
False
t/f Increases in income taxes reduce a firms operating income
False
Current liabilities include
Accrued interest payable
Liabilities equal…
Assets minus equity
t/f With straight line depreciation, the book value of the asset is reduced by the same amount each year
True
t/f Retained earnings are part of the stockholders equity in a corporation
True
t/f Additional paid in capital is a current asset
False
t/f If a firm has retained earnings, it has an equal amount of cash
False
The paying of a cash dividend causes the firms
assets and equity to decrease
t/f If a firm sells inventory at cost for cash, its total assets rise
False
A company may pay
a regular quarterly cash dividend
stock dividends
no dividends
All three
If the valuation of a stock is $20 and it currently sells for $25 then
the stock is overvalued and the investor should establish a short position
t/f The value of a stock depends in part on future dividends and investors required return
True
t/f The return on an investment in stock depends on both dividends and capital gains
True
When risk analysis is introduced into the dividend growth model, the required rate of return considers
The firms beta coefficient
The value of a stock should decline if
The firms beta rises
