Assume You Are Using the Dividend Growth Model to Value

question 83

Multiple Choice

Assume you are using the dividend growth model to value stocks.If you expect the market rate of return to increase across the board on all equity securities,then you should also expect the:

• A)market values of all stocks to increase.
• B)market values of all stocks to remain constant as the dividend growth will offset the increase in the market rate.
• C)market values of all stocks to decrease.
• D)stocks that do not pay dividends to decrease in price while the dividend-paying stocks maintain a constant price.
• E)dividend growth rates to increase to offset this change.

Calculate the financial impact of implementing cash management tools such as lockbox systems.

Evaluate the economic implications of ordering and inventory carrying costs, including the use of the Economic Order Quantity model.

Assess the benefits and considerations of quantity discounts in inventory management.

Identify the reasons why firms maintain cash balances and the purposes of holding marketable securities.

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Definitions:

Net Operating Working Capital

Net Operating Working Capital is the difference between a company's operating current assets and its operating current liabilities, indicating short-term financial health.

Capital Budgeting

The method of assessing and choosing long-term investments consistent with the objective of maximizing shareholder wealth.

Fixed Assets

Long-term tangible assets used in the operation of a business, such as buildings, machinery, and equipment, which are not intended for sale.

Initial Outlays

The initial investments required to start a project or purchase an asset, often including costs such as capital expenditure and working capital.