451. Using the Gordon assumptions to estimate growth, what should be the effect of an increase in b, the retention ratio?
A. A fall in next period dividend and a fall in dividend growth.
B. A rise in next period dividend and a rise in dividend growth.
C. A fall in next period dividend and a rise in dividend growth.
D. A rise in next period dividend and a fall in dividend growth.

452. What is the value of the firm usually based on?
A. The value of debt and equity.
B. The value of equity.
C. The value of debt.
D.The value of assets plus liabilities.

453.If the total value of cash flow from a firm’s projects was £1m this year, cash flow growth was expected to be 4%, and the firm’s cost of capital was 9%, what would be the value of the firm?
A. £20m
B. £5m
C. £25m
D. £20.8m

454. What are price-earnings valuations usually based on?
A. Gross profit.
B. Operating profit.
C. EBITDA.
D. Free cash flow.

455. For which of the following types of company would Net Asset Value (NAV) probably be an unsuitable basis for valuation?
A. A property investment company like Land Securities.
B. An investment trust like Alliance Trust.
C. An advertising agency like M&C Saatchi.
D. A mining company like BHP Billiton.

456. Which of the following is not a reason why firms typically do not report values for intangible capital?
A. A firm’s intangible capital is the main source of its competitive advantage.
B. It may be hard to firmly establish intangible value in the event of a dispute.
C. There are no completely reliable metrics that allow us to do it.
D. Tangible capital is of significantly greater value than intangible capital.

457. Which of the following defines the market to book value?
A. The ratio of stock market valuation divided by the value of its NAV.
B. The ratio of NAV value divided by stock market valuation.
C. The market value of tangible assets divided by the book value of tangible assets.
D. The market value of intangible assets divided by the book value of intangible assets.

458. Volatility risk of a single asset is usually measured by which of the following?
A. Standard deviation.
B. Variance.
C. Correlation.
D. Covariance.

459. How many undiversified assets does it normally take to achieve maximum reduction of risk usually reached in a portfolio?
A. 2 to 5 assets.
B. 5 to 10 assets.
C. 20 to 30 assets.
D. 50 to 60 assets.

460. Which of these is an appropriate measure of individual share risk (i.e. the risk of a single share held aspart of a porfolio)?
A. Variance.
B. Beta.
C. Standard deviation.
D. Correlation.

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