L4&5 Stock Valuation & Capital Budgeting Flashcards
What is the dividend yield
The dividend divided by the price of a stock
What is the capital gain rate
The percentual change in the stockprice (p1-p0)/p0
how do you calculate the expected opertunity cost rate in the dividend discount model
You sum up the capital gains rate and the dividend yield
What is the expected price in the dividend discount model
The time adjusted value of the sum of future price and dividend
What is NPVGO
The net present value of the growth of a company. calculated by subtracting EPS divided by return on retained earnings from retained earnings divided by return on retained earnings subtracted by the growth rate aka the return on retained earnings times the retention rate.
Comparing multiples can help us even if the entire industry is overvalued
false
How is a stock value effected by a repurchase of stocks
PV(Future total dividends and repurchases)/ shares outstanding; There is less money for dividends but at the same time there are fewer shares
When should you accept a project according to the payback period method
When the payback period is shorter than the firms benchmark
If a project has one positive cash-inflow and many negative outflows when should you accept a project
When the IRR is less than the discount rate
If a project has one negative cash outflow and many positive cash inflows when should you accept a project
When IRR is greater than the discount rate
IRR ignores timing for mutually exclusive projects
True
What is the formula for the modified IRR model MIRR
nthroot(terminal cashflow / initial investment) -1 = MIRR > r
