Stock Valuation Methods

Question 1

Dividend discount model DDM . W

Answer 1

Is quantitative method of valuing a company’s stock price based on assumption that current fair price of stock equals the sum of all company’s future dividends discounted back to their present value .

Question 2

What is the DDM assumption?

Answer 2

Assumes that the current fair price of a stock equals the sum of all company’s future dividends discounted back to their present value.

Question 3

Intrinsic value

Answer 3

Is the pv of all expected future cash flow, discounted at the appropriate discount rate

Question 4

EBITDA reflects What?

Answer 4

Reflects the stock market’s positive assessment of [the firm’s generation of the profits through ongoing operations. It measures how much an investor must spend to buy a dollar of EBITDA.

Price/EBITDA Ratio = market price per share/EBITDA per share

Question 5

Under the guise of comparability, the argument was that a company with (continue)

Answer 5

A company with debt that was paying interest expense should not be compared on a profit basis with a closely related company that operates without debt.