INV3701 ASSIGNMENT 1
SEMESTER 2 - 2022
UNIQUE NUMBER: 763397
DUE DATE: 08 AUGUST 2022
, Questions
1. Which one of the following is most likely correct about alpha?
1. Alpha is the excess risk adjusted return.
2. An analyst will only make a profit when alpha is positive.
3. Alpha is the difference between market return and the firm's specific return.
2. An appropriate valuation approach for a company that is going out of business
would be to calculate its…
1. residual income value.
2. liquidation value.
3. dividend discount model value.
The liquidation value is the estimate of what the assets of the firm will bring when sold
separately, net of the company's liabilities. It is most appropriate because the firm is not a
going concern and will not pay dividends. The residual income model is based on the going
concern assumption and is not appropriate for valuing a firm that is expected to go out of
business.
1
SEMESTER 2 - 2022
UNIQUE NUMBER: 763397
DUE DATE: 08 AUGUST 2022
, Questions
1. Which one of the following is most likely correct about alpha?
1. Alpha is the excess risk adjusted return.
2. An analyst will only make a profit when alpha is positive.
3. Alpha is the difference between market return and the firm's specific return.
2. An appropriate valuation approach for a company that is going out of business
would be to calculate its…
1. residual income value.
2. liquidation value.
3. dividend discount model value.
The liquidation value is the estimate of what the assets of the firm will bring when sold
separately, net of the company's liabilities. It is most appropriate because the firm is not a
going concern and will not pay dividends. The residual income model is based on the going
concern assumption and is not appropriate for valuing a firm that is expected to go out of
business.
1
