The Return on Assets Will Be Greater Than the Rate

question 193

True/False

The return on assets will be greater than the rate of return on common stockholders' equity if the company has been successful in trading on the equity at a gain.

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Definitions:

Market Capitalization Rate

The expected return on an investment in a market portfolio, based on the market price of risk.

Constant-Growth DDM

A model for valuing a company's stock by using predicted dividends and discounting them back to present value assuming a constant growth rate.

Preferred Share

A class of ownership in a corporation with a higher claim on assets and earnings than common stock.

Dividend

A portion of a company's earnings that is paid to shareholders, typically on a quarterly basis.