Reference no: EM132863706

1- The primary sections of a statement of cash flows are:

a)cash flows from investing, operating, and financing activities.
b)cash flows from investing and operating activities.
c)cash flows from investing, financing, and accounting activities.
d)cash flows from investing, operating, financing, and accounting activities.

2-You would find the payment of dividends in the statement of cash flow under:

a)cash flows from operating activities.
b)cash flows from investing activities.
c)cash flows from financing activities.
d)cash flows from purchasing activities.cash flows from selling activities.

3-Cash flows from investing activities would involve the purchase or sale of plant and equipment.

True
False

4-What is the value of a stock which has a current dividend (D 0) of $1.50, and is growing at the rate of 7%? The investor's required rate of return is 12%.

a) $26.75
b) $30.00
c) $32.10
d) $21.42
e) $13.38

5- The general dividend model assumes the value of a firm is equal to the present value of future dividends.

True
False

6- With the income-statement method of forecasting earnings per share (EPS), you start with a forecast of profits.

True
False

7- History shows that, as inflation increases, price-earnings ratios increase along with inflation.

True
False

8- In the formula P 0 = D 1/(K e - g), if K e rises while dividends and growth stay the same, the stock price will decline.

True
False

9- Firms with highly liquid cash positions may be attractive merger candidates, mainly because their cash can be used to pay dividends.

True
False

10- Stock valuation based on the relationship between a stock's P/E ratio and the market may result in superior returns if:

a) the firm is riskier than the market.
b) the firm has a high P/E ratio, relative to the market.
c) the stock is trading at the low end of its P/E ratio, relative to the market
d) More than one of the above