ESSENTIALS OF INVESTMENTS (GLOBAL EDITION) CHAPTER 13 QUESTIONS WITH CORRECT ANSWERS

ESSENTIALS OF INVESTMENTS
(GLOBAL EDITION) CHAPTER 13
QUESTIONS WITH CORRECT ANSWERS
2024-2025
book value - correct answer-the net worth of common equity according to a firm's balance sheet



liquidation value - correct answer-
net amount that can be realized by selling the assets of a fiirm and paying off the debt



replacement cost - correct answer-cost to replace a firm's assets



Tobin's q -Pcorrect answer-ratio of marketPvalue of the firm to replacement cost



intrinsic value - correct answer-
the present value of a firm's expected future net cash flows discounted by the requires rate of return



market capalization rate - correct answer-
the market consensus estimate of the appropiate discount rate for a firm's cash flows



dividend discount model (DDM) - correct answer-
a formula for the intrinsic value of a firm equal to the present value of all expected future dividends



constant growth DDM - correct answer-
a form of the dividend discount model that assumes dividends will grow at a constant rate



dividend payout ratio -Pcorrect answer-percentage of earnings paid out as dividends



plowback ratio or earnings retention ratio - correct answer-
the proportions of the firm's earnings that is reinvested in the business (and not paid out as dividends)