Quiz Ch 04 – Identifying a Growth Stock
Principles of Corporate Finance
Brealey, Myers, and Allen
13th Edition
Which is classified as a growth stock?
Which is classified as a growth stock?
True or false: Owners of common stocks receive their only returns through cash dividends.
True or false: The cost of equity capital for a constant dividend growth stock is calculated as the difference between the dividend yield and the growth rate in dividends.
True or false: The expected return from a common stock, also known as its market capitalization rate or cost of equity capital, is anticipated by investors.
True or false: The present value of growth opportunities makes up a substantial portion of the total value of a growth stock.
True or false: The constant growth model, used for stock valuation, does not apply to companies experiencing a negative growth rate in their dividends, indicating a decline in growth.
True or false: Securities belonging to the same risk class are priced to yield the same expected return.
True or false: A stock’s value is derived by assessing the present worth, utilizing the market capitalization rate, of all the expected future earnings associated with the stock.
True or false: Valuating a firm with a supernormal (variable) growth rate in its initial years is not feasible.
What makes up a significant portion of the value of a growth stock?