Financial Valuations and Transaction Controls Flashcards

1
Q

Dividend Discount Model

A

the value of a share of stock is found by taking the dividend per share and dividing it by the discount rate less the dividend growth rate

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2
Q

Internal Growth rate

A

ROE x Retention Rate

Retention Rate = 1 minus payout rate

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3
Q

Valid methods of valuation include

A

1) multiples of sales
2) Multiple of earnings
3) Multiple of cash flow
4) Multiple of book value
5) commissions
6) EBITDA

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4
Q

super normal DDM

A

valuation method but it requires the firm pay a dividend to be utilized.

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5
Q

Bond prices move

A

inversely with interest rates

When interest rates increase, bond prices fall (decrease)

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6
Q

lower bond price will result

A

in higher current yields and eventual capital gains which increases the bond’s YTM

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7
Q

Preferred stock is an example of

A

perpetuity

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8
Q

To Value Perpetuity

A

Annual Dividend / required rate of return

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9
Q

Taxable equivalent yield

A

Muni Tax / 1 - tax rate

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