Financial Valution State 'true' or 'false', and briefly explain your answer. 7. Residual income model is better than div
Posted: Sun Apr 17, 2022 6:25 pm
Financial Valution
State 'true' or 'false', and briefly explain your answer.
7. Residual income model is better than dividend discount model
since it recognises value earlier than valuations based on
dividends.
8. Since the timing and scale of acquisitions is difficult to
forecast, we can assume the firm will not make any further
acquisitions.
9. We should estimate the cost of debt by dividing interest
charge in the income statement by the amount of debt in the balance
sheet.
10. Firms with a higher Price/Earnings ratio are overvalued
relative to those with a lower ratio.
11. The Price to Sales ratio should not be used for relative
valuation.
12. Though the forecasted year-on-year project cash flows are
highly correlated, the present value of these cash flows follows a
random walk.
State 'true' or 'false', and briefly explain your answer.
7. Residual income model is better than dividend discount model
since it recognises value earlier than valuations based on
dividends.
8. Since the timing and scale of acquisitions is difficult to
forecast, we can assume the firm will not make any further
acquisitions.
9. We should estimate the cost of debt by dividing interest
charge in the income statement by the amount of debt in the balance
sheet.
10. Firms with a higher Price/Earnings ratio are overvalued
relative to those with a lower ratio.
11. The Price to Sales ratio should not be used for relative
valuation.
12. Though the forecasted year-on-year project cash flows are
highly correlated, the present value of these cash flows follows a
random walk.