Quiz Ch 09 – T/F Corporate Valuation Model and Dividends
Fundamentals of Financial Management, Concise
Brigham and Houston
09th Edition
True or false: The corporate valuation model requires dividend payments.
True or false: The corporate valuation model requires dividend payments.
True or false: The fundamental DCF stock valuation model indicates that the value of a stock to an investor is influenced by the duration of their planned stock ownership.
True or false: Estimating cash flows for common stock is more challenging than for bonds due to the stock’s residual claim compared to the contractual obligation of bonds.
True or false: Founders’ shares, a form of classified stock, are owned by the company’s founders and typically hold higher voting power per share compared to other common stock classes.
True or false: To determine the total corporate value, projected free cash flows are discounted at the firm’s weighted average cost of capital.
True or false: In the case of a new stock issuance, the price at which the stock will trade is determined by the marginal investor.
True or false: As per the nonconstant growth model in the textbook, the discount rate employed to compute the present value of anticipated cash flows during the initial growth phase is identical to the discount rate used for determining the present values of cash flows during the subsequent constant growth period.
True or false: High operating leverage in firms is typically associated with elevated asset betas.
True or false: When a firm’s stockholders possess the preemptive right, it signifies that they can summon a meeting to vote on management replacement. Without this right, dissident stockholders would need to pursue management change via a proxy fight.
True or false: The preemptive right empowers existing stockholders with the privilege to acquire new shares issued by the firm proportionately. This right safeguards against both control and value dilution for current stockholders.