1. An analyst can use the expression for P/E to consider whether the forecasts of earnings growth built into the current stock price are reasonable.

True

False

2. A companys ability to generate free cash flows and pay dividends in the future can be examined using a spreadsheet model with pro forma income statements and balance sheets.

False

True

3. In performing discounted cash flow analysis for risky cash flows (i.e., investments with more risk than government debt), two adjustments should be made relative to the risk-free case: First, the expected value of the cash flows, and second, the discount rate for the cash flows.

True

False