Equity Valuation Models Based on Dividends, Cash Flows, and Earnings

question 30

Multiple Choice

Equity valuation models based on dividends, cash flows, and earnings have been the topic of many theoretical and empirical research studies in recent years. All of the following are true regarding these studies except :

• A) Share prices in the capital markets generally correlate closely with share value.
• B) Share prices do not always equal share values.
• C) Temporary deviations of price from value occur.
• D) Unexpected changes in earnings, dividends, and cash flows do not correlate closely with changes in stock prices.

Recognize the accounting treatment for callable bonds and their repurchase.

Comprehend the calculation of cash proceeds from bond issues.

Understand the concepts of bond issuance and the effects of market interest rates on bond pricing.

Identify and calculate gains or losses on bond redemption.

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