Which of the Following Situations May Make the Business Valuation

question 32

Multiple Choice

Which of the following situations may make the business valuation by the dividend yield method unreliable?

• A) Dividend policy governing payout is different for different companies.
• B) An exchange traded business tends to pay out smaller dividends than an unlisted business.
• C) Businesses that are not traded on the stock exchange do not pay out dividends.
• D) Businesses listed on an exchange are traded more frequently and, therefore, reflect new information more efficiently than unlisted businesses.
• E) Dividend payouts impact a business's income tax payable, and, therefore, the business valuation, differently in different provinces.

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Definitions:

Semiannually

Occurring twice a year, typically every six months.

Call Price

The price at which a bond or other security can be repurchased by the issuer before its maturity date, usually at a premium to the face value.

Nominal Yield To Maturity

The return an investor expects to earn if a bond is held until its maturity date, without adjusting for inflation.

Semiannual Coupon

A semiannual coupon refers to the interest payment made to bondholders twice a year.