Financial Valution

State 'true' or 'false', and briefly explain your answer.

7. Residual income model is better than dividend discount model since it recognises value earlier than valuations based on dividends.

8. Since the timing and scale of acquisitions is difficult to forecast, we can assume the firm will not make any further acquisitions.

9. We should estimate the cost of debt by dividing interest charge in the income statement by the amount of debt in the balance sheet.

10. Firms with a higher Price/Earnings ratio are overvalued relative to those with a lower ratio.

11. The Price to Sales ratio should not be used for relative valuation.

12. Though the forecasted year-on-year project cash flows are highly correlated, the present value of these cash flows follows a random walk.