TRUE/FALSE

1. The value of stock depends in part on future dividends and investors' required return.

2. The return on an investment in stock depends on both dividends and capital gains.

3. The dividend-growth model may be applied only if it is assumed that the growth in dividends will be constant.

4. The value of a stock should increase if investors' required rate of return declines.

5. The dividend-growth model assumes the firm will be liquidated at some specified time in the future.

6. Valuation of stock depends on past dividends.

7. If the valuation of a stock is $10 and its price is $13, the investor should establish a short position in the stock.

8. The required return for an investment in a stock increases if the firm's beta declines

9. An increase in the required return on the market will tend to decrease stock valuations.

10. The P/E ratio measures a stock's price relative to thefirm's equity.

11. If management increases a firm's dividends, its growthrate will also increase.

12. An increase in the required return will tend to increase the value of a stock.

13. The value of a common stock depends in part on the expected growth in dividends.

14. The dividend-growth model determines what an investor thinks a stock is worth but not necessarily its price.

15. An increase in risk should cause the value of a commonstock to fall.

16. One index of systematic risk is a stock's beta coefficient.

17. The risk-adjusted model for the valuation of common stock excludes yields on competitive securities.

18. The dividend-growth model cannot be adjusted for changes in growth rates or changes in risk.

19. A P/E ratio may be used as a multiple to forecast a firm's future earnings.

20. Low P/E stocks indicate that the firm distributes a large proportion of its earnings as cash dividends.

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TRUEFALSET T 1 The value of stock depends in part on future dividends and investors required return ... View the full answer