Which of the following statements is CORRECT?
A. Two firms with the same expected free cash flows and growth rates must also have the same value of operations.
B. It is appropriate to use the constant growth model to estimate a stock's value even if its growth rate is never expected to become constant.
C. If a company has a weighted average cost of capital WACC = 12%, and if its free cash flows are expected to grow at a constant rate of 5%, this implies that the stock's dividend yield is also 5%.
D. The value of operations is the present value of all expected future free cash flows, discounted at the free cash flow growth rate.
E. The constant growth model takes into consideration the capital gains investors expect to earn on a stock.
Answer: E
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Which of the following statements most accurately explains the behavior of costs?
A) Costs can be fixed, variable, or a combination of both. B) The majority of costs are variable per unit of production. C) The majority of costs are fixed per unit of production. D) Mixed costs are treated as variable costs.
(CMA adapted, Dec 93 #17) Norton Inc has a 2 to 1 current ratio. This ratio would increase to more than 2 to 1 if
a. a previously declared stock dividend were distributed. b. the company wrote off an uncollectible receivable. c. the company sold merchandise on open account that earned a normal gross margin. d. the company purchased inventory on open account. e. none of the above.
In law, a business is considered to have stopped operating once a Receiver or Manager
has been appointed. Indicate whether the statement is true or false
Best practices supported by RUP include each of the following except
A) manage requirements. B) use component-based architectures. C) develop software iteratively. D) facilitate a linear approach to software development.