A valuation that simply capitalizes a forecast of operating income for the next year implicitly assumes that

Question:

A valuation that simply capitalizes a forecast of operating income for the next year implicitly assumes that residual operating income will continue as a perpetuity. Is this correct?

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For book-img-for-question

Financial statements

ISBN: 978-007802531

5th Edition

Authors: Stephen Barrad

See More Books

Question Posted: Mar 17, 2012 06:39 AM

See More Questions

Beginning inventory, purchases, and sales data for tennis rackets are as follows: April 3 Inventory 19 units @ $15 11 Purchase 12 units @ $19 14 Sale 26 units 21 Purchase 12 units @ $15 25 Sale 10...
Why is a simple forecast of operating income based on book value usually not a good forecast? When might such a forecast be a good forecast?
Prepare the annual operating expense budget for the next year using the formulas from problem #1 and the following assumptions: Remember there are 13 accounting periods in a fiscal year, each with...
Solve exponential equation. Express irrational solutions in exact form and as a decimal rounded to three decimal places. 2 2x + 2 x - 12 = 0
Consider the following information for Mr. and Mrs. Di Palma: On June 10, 2012, they sold their principal residence for $80,000 and incur $6,000 of selling expenses. The basis of the residence,...
Provide examples of a. blocking interprocess communication; b. nonblocking interprocess communication.
Describe how spirituality and religion help to shape ones healthcare choices.
Uni-Select Inc.s comparative balance sheet information at December 31, 2014 and 2013, and its income statement for the year ended December 31, 2014, are as follows: During 2014, the following...
I observed a squirrel running across the roof of the my house. The squirrel attempted to jump to a tree. The poor squirrel had bad luck and fell short of the tree. I am happy to report that the...
1. What should BoB have done to avoid this situation? 2. Should the sales support staff ask the IT department to rewrite the user manual as a maintenance project, or should they request more training...
Valuation models can be dangerous if used naively: An analyst can plug in any growth rate or required return estimate to get a desired valuation. Indeed, a valuation model can be a vehicle to build...
What is the difference between an SF2andan SF3 forecast?
FansForYou is a small, privately owned company that manufactures fans. Large variations in demand due to seasonality have contributed to high costs for the company. FansForYou currently uses a level...
The law of multiple proportions applies to two of more compounds of the same two or more ele- ments. Show that the following data support the law. Compound 1 Compound 2 % C 52.2 74.9 %H 13.0 25.1 %0...
Use the data in the table below collected from squid to answer the following discussion questions. Extracellular Concentration Ion Relative Permeability Na CI K+ 0.0013 0.0017 1.0000 (moles/liter)...
Define Daniell - sacobi type galvanic cell. Give an example ( write a cell diagram ) . Explain how charge is transferred in such a galvanic cell ( how do electrons and ions carry charge ) .
4) Two substances are in thermal equilibrium at the temperature To. They have masses m, m and specific heats c, c. The substances are then put separately in thermal contact with a colder heat...
A flywheel with mass m and radius r is rotating without friction at a given angular velocity, w. A semi-circle with the same mass but unknown radius r2 is rotating (also without friction) in opposite...
Calculate the Class 4 NICs payable in each of the following cases: (a) Shawn has trading income for 2020-21 of 16,140. (b) Catherine has trading income for 2020-21 of 55,000. (c) Paul has trading...
Briefly describe the following types of group life insurance plans: a. Group term life insurance b. Group accidental death and dismemberment insurance (AD&D) c. Group universal life insurance d....
Some PCl 5 is placed in a 10.0-L reaction cylinder. The temperature is increased to 500 K, and the following reaction reaches equilibrium. In which direction does the system react if the external...
Two popular methods of financial statement analysis are horizontal analysis and vertical analysis. Explain the difference between these two methods.
Two popular methods of financial statement analysis are horizontal analysis and vertical analysis. Explain the difference between these two methods.
Two popular methods of financial statement analysis are horizontal analysis and vertical analysis. Explain the difference between these two methods.
According to theknot.com, online dating is the most common way people meet their spouses today. This claim was based on a survey of 1,400 randomly selected recently married couples, with 266...
Miller's Hardware plans on saving $40,000, $50,000, and $58,000 at the end of each year for the next three years, respectively. How much will the firm have saved at the end of the three years if it...
Wizmo technologies is producing a new kids watch, an electronic gadget for kids to stay connected with their parents. The project requires an initial investment in plant and equipment of 6 million....

A valuation that simply capitalizes a forecast of operating income for the next year implicitly assumes that

Question:

Step by Step Answer:

Yes this is correct The following two valuations are equivalent using a 10 requi...View the full answer

Financial statements

Students also viewed these Accounting questions