Answer with T/F

1. For the dividend discount model (DDM) under supernormal growth (or non-constant

growth model), the discount rate (r) during the initial supernormal growth period is as

same as the discount rate (r) used in the later, steady growth period. ( )

2. For the corporate valuation model (or free cash flow (FCF) discount model) in firm

valuation, the cost of common equity (rc) is generally used as a discount rate. ( )

3. If the expected return of a stock based on the current stock price (P0) is located above

the security market line (SML), then a stock analyst would issue a coverage report with

a buy recommendation. ( )

4. If the internal rate return (IRR) and the net present value (NPV) methods give

conflicting results between mutually exclusive projects, the project with a higher NPV

should be chosen. ( )