Stock Valuation Techniques Practice Exam

Stock Valuation Techniques Practice Exam

1. Which of the following is a key principle of the Dividend Discount Model (DDM)?
   A) The dividend growth rate is constant.
   B) Stock prices are based on the book value.
   C) Dividends are expected to decrease over time.
   D) The stock price is solely based on the company’s debt.

2. In the Price-to-Earnings (P/E) ratio method, a higher P/E ratio generally indicates:
   A) A company is overvalued.
   B) A company has low earnings.
   C) A company is undervalued.
   D) A company has high future growth expectations.

3. What is the main limitation of the Dividend Discount Model (DDM)?
   A) It cannot be applied to companies that do not pay dividends.
   B) It requires precise estimates of future dividends.
   C) It assumes a variable interest rate.
   D) It only applies to small companies.

4. The Capital Asset Pricing Model (CAPM) is used to determine:
   A) The intrinsic value of a stock.
   B) The expected return on a stock given its risk.
   C) The book value of a stock.
   D) The total debt of a company.

5. A company has a dividend growth rate of 5% and the required rate of return is 10%. If the company’s most recent dividend was $2, what is the estimated stock price using the Dividend Discount Model?
   A) $20
   B) $40
   C) $50
   D) $100

6. Which of the following factors is NOT considered in the discounted cash flow (DCF) model for stock valuation?
   A) Future dividends
   B) Risk-free rate
   C) Free cash flow projections
   D) Stock market trends

7. The Gordon Growth Model is a form of the Dividend Discount Model (DDM) that assumes:
   A) Dividends will grow at a constant rate indefinitely.
   B) Dividends will decrease over time.
   C) Stock price is based on the company’s earnings.
   D) The required rate of return is negative.

8. When using the P/E ratio, a lower P/E typically suggests:
   A) The stock is overvalued.
   B) The stock has higher expected growth.
   C) The stock is undervalued or facing challenges.
   D) The stock pays no dividends.

9. The Discounted Cash Flow (DCF) model discounts:
   A) Only historical cash flows.
   B) Future cash flows to the present value.
   C) Earnings before taxes.
   D) Depreciation expenses.

10. What does the term “Beta” represent in the context of stock valuation?
    A) The average annual dividend yield.
    B) The risk of a stock relative to the market.
    C) The company’s total revenue.
    D) The growth rate of dividends.

11. The price-to-book (P/B) ratio is most commonly used for valuing companies in which industry?
    A) Technology
    B) Utilities
    C) Real Estate
    D) Biotechnology

12. In the Price/Sales (P/S) ratio method, a lower ratio often suggests:
    A) The company has strong profitability.
    B) The stock is undervalued.
    C) The company has declining sales.
    D) The company is highly leveraged.

13. A company’s stock price is influenced by:
    A) Only future growth potential.
    B) The market’s perception of its value and future performance.
    C) Only its historical earnings.
    D) Its debt level.

14. In a constant growth DDM, if the required rate of return is higher than the dividend growth rate, the stock price will:
    A) Increase indefinitely.
    B) Decrease indefinitely.
    C) Stay constant.
    D) Increase at a diminishing rate.

15. Which method is particularly useful for valuing companies with irregular or no dividend payments?
    A) Dividend Discount Model (DDM)
    B) Discounted Cash Flow (DCF) model
    C) Price-to-Earnings ratio
    D) Earnings Before Interest and Taxes (EBIT)

16. A company with a high Price-to-Earnings (P/E) ratio relative to its peers might be interpreted as:
    A) Having low growth potential.
    B) Overvalued or highly speculative.
    C) Less risky.
    D) Undervalued.

17. The method of stock valuation that involves estimating the company’s future sales and comparing it to market value is called:
    A) P/E ratio analysis
    B) Price-to-Book ratio
    C) Price-to-Sales ratio
    D) Dividend Discount Model

18. In the Dividend Discount Model, the required rate of return is typically determined by:
    A) The interest rate on bonds.
    B) Market return expectations and the stock’s risk.
    C) Historical earnings performance.
    D) Dividend yield alone.

19. Which valuation method is based on comparing a company’s stock price to its earnings per share?
    A) P/B ratio
    B) Dividend Discount Model
    C) P/E ratio
    D) DCF model

20. What does the intrinsic value of a stock represent in valuation methods?
    A) The market price of the stock.
    B) The theoretical value of the stock based on financial analysis.
    C) The total dividend paid by the company.
    D) The company’s revenue.

21. The main advantage of using the Dividend Discount Model (DDM) for valuation is:
    A) It’s simple and applicable to all companies.
    B) It is best suited for companies with high growth rates.
    C) It provides a precise value for stocks with stable dividends.
    D) It relies solely on historical performance.

22. If a company’s dividend is expected to grow at a rate of 4% and the required rate of return is 8%, what is the stock price if the most recent dividend was $3?
    A) $75
    B) $80
    C) $75
    D) $60

23. The PEG ratio is used to measure:
    A) Price-to-Book value.
    B) The relationship between the P/E ratio and the company’s earnings growth rate.
    C) Dividend growth potential.
    D) Market risk.

24. Which of the following is a limitation of using the DCF method for stock valuation?
    A) It is too complex to use for large companies.
    B) It requires accurate projections of future free cash flows.
    C) It does not take into account dividends.
    D) It is less accurate for growing companies.

25. When applying the DDM, if the dividend growth rate is expected to be lower than the required rate of return, the stock price will:
    A) Be very high.
    B) Be very low.
    C) Remain constant.
    D) Increase at a diminishing rate.

26. Which of the following is NOT typically used to calculate the intrinsic value of a stock using the Discounted Cash Flow model?
    A) Free cash flow projections
    B) Terminal value
    C) Expected dividend payments
    D) Discount rate

27. The price-to-earnings (P/E) ratio of a stock is often used to evaluate:
    A) A company’s dividend policy.
    B) The company’s risk level.
    C) A company’s profitability and market valuation.
    D) A company’s debt-to-equity ratio.

28. Which of the following methods is most appropriate for valuing startups or high-growth companies that do not yet pay dividends?
    A) Price-to-Earnings ratio
    B) Discounted Cash Flow (DCF) model
    C) Dividend Discount Model (DDM)
    D) Price-to-Sales ratio

29. In the Gordon Growth Model, the stock price is influenced by:
    A) Only the current dividend.
    B) The required rate of return and the growth rate of dividends.
    C) Only the growth rate of dividends.
    D) Company revenue and earnings.

30. What is the primary purpose of the P/B ratio when valuing a stock?
    A) To compare the stock price to the company’s book value.
    B) To calculate future dividend growth.
    C) To assess the company’s cash flow.
    D) To estimate the company’s stock price based on its earnings.

31. The Dividend Discount Model (DDM) assumes that a company’s dividends will:
    A) Grow at a constant rate.
    B) Remain constant indefinitely.
    C) Decrease over time.
    D) Be unpredictable.

32. What is the main advantage of the Price-to-Earnings (P/E) ratio over the Dividend Discount Model (DDM)?
    A) It considers future cash flows.
    B) It can be used for companies that do not pay dividends.
    C) It discounts future dividends.
    D) It is only useful for growth companies.

33. If a company’s dividend yield is 4% and its earnings per share (EPS) is $5, what is the stock price?
    A) $20
    B) $125
    C) $150
    D) $200

34. The Price-to-Sales (P/S) ratio is particularly useful for evaluating:
    A) Companies with irregular earnings.
    B) Companies that do not pay dividends.
    C) Companies in the technology sector.
    D) Startups and high-growth companies.

35. In the Capital Asset Pricing Model (CAPM), the expected return on a stock depends on:
    A) The overall market’s performance.
    B) The stock’s volatility in relation to the market.
    C) The stock’s dividend yield.
    D) The stock’s sales performance.

36. Which valuation technique is best used for companies that are experiencing rapid growth but do not yet pay dividends?
    A) Dividend Discount Model (DDM)
    B) Price-to-Earnings (P/E) ratio
    C) Discounted Cash Flow (DCF) model
    D) Price-to-Book (P/B) ratio

37. The terminal value in a DCF model is:
    A) The present value of future cash flows after the forecast period.
    B) The expected dividend payments.
    C) The price-to-earnings ratio of the company.
    D) The company’s market capitalization.

38. If a company’s P/E ratio is significantly lower than its competitors, it may indicate that the company:
    A) Is highly overvalued.
    B) Is undervalued or facing challenges.
    C) Has a better dividend yield.
    D) Is experiencing high growth.

39. What is the major disadvantage of using the Price-to-Book (P/B) ratio for stock valuation?
    A) It does not consider dividends.
    B) It is not applicable to intangible assets.
    C) It relies solely on earnings projections.
    D) It requires precise future cash flow estimates.

40. The Discounted Cash Flow (DCF) model is most useful for valuing:
    A) Companies with irregular earnings and no dividends.
    B) Companies with stable, predictable cash flows.
    C) Startups with high volatility.
    D) Growth companies with no debt.

41. The Gordon Growth Model is a type of:
    A) Price-to-Earnings ratio model.
    B) Dividend Discount Model (DDM).
    C) Free Cash Flow model.
    D) Price-to-Book ratio.

42. In stock valuation, the cost of equity can be determined using:
    A) Dividend yield plus growth rate.
    B) The weighted average cost of capital (WACC).
    C) The Price-to-Earnings (P/E) ratio.
    D) The book value of equity.

43. If a company has a dividend growth rate of 3% and a required return of 7%, what is the intrinsic value of a stock with a most recent dividend of $4 using the Dividend Discount Model (DDM)?
    A) $50
    B) $60
    C) $75
    D) $100

44. A company has free cash flow of $10 million, and its WACC is 8%. If the company’s projected growth rate is 5%, what is the company’s enterprise value using the DCF model?
    A) $125 million
    B) $200 million
    C) $250 million
    D) $100 million

45. The Price-to-Sales (P/S) ratio is calculated by dividing the stock price by:
    A) Earnings per share (EPS).
    B) The total revenue of the company.
    C) The book value of equity.
    D) The company’s market value.

46. If a company’s stock price is expected to grow at a rate of 6% annually, what is the expected return on the stock if the dividend yield is 4%?
    A) 6%
    B) 10%
    C) 8%
    D) 4%

47. Which of the following is NOT a factor in the Dividend Discount Model (DDM)?
    A) Dividend growth rate.
    B) Stock price.
    C) Required rate of return.
    D) Expected market conditions.

48. The Price-to-Book (P/B) ratio is best suited for valuing companies with:
    A) Low capital expenditures and high earnings growth.
    B) High intangible assets like intellectual property.
    C) A lot of physical assets like manufacturing equipment.
    D) A low dividend payout ratio.

49. What is the main drawback of using the Price-to-Sales (P/S) ratio for stock valuation?
    A) It only applies to companies in the finance sector.
    B) It doesn’t account for profitability or debt.
    C) It requires precise projections of future sales.
    D) It is too complex for most investors.

50. When applying the Dividend Discount Model (DDM), a higher dividend growth rate results in:
    A) A lower stock price.
    B) A higher stock price.
    C) No change in the stock price.
    D) A higher required return.

51. The weighted average cost of capital (WACC) is used in the DCF model to:
    A) Calculate future dividends.
    B) Discount the company’s future cash flows.
    C) Estimate the company’s market value.
    D) Determine the company’s debt levels.

52. What type of companies is the P/E ratio most useful for?
    A) Companies with unpredictable earnings.
    B) Companies in the financial services sector.
    C) Companies with stable earnings and growth.
    D) Startups with no earnings.

53. What does a PEG ratio greater than 1 typically suggest about a stock?
    A) The stock is undervalued relative to its growth rate.
    B) The stock is overvalued relative to its growth rate.
    C) The stock’s earnings are growing very slowly.
    D) The stock is priced correctly.

54. The Price-to-Book (P/B) ratio compares the market price of a stock to:
    A) The company’s total revenue.
    B) The company’s debt obligations.
    C) The company’s equity value.
    D) The company’s earnings per share.

55. The DCF model is particularly sensitive to:
    A) The company’s dividend policy.
    B) The discount rate and growth assumptions.
    C) Market trends and stock prices.
    D) The company’s debt-to-equity ratio.

56. Which of the following valuation models is based on the premise that the value of a stock is equal to the sum of all future expected dividends, discounted to the present?
    A) P/E ratio.
    B) Dividend Discount Model (DDM).
    C) Price-to-Sales ratio.
    D) Free Cash Flow model.

57. In the P/E ratio method, an increasing P/E ratio over time generally indicates:
    A) A decrease in the stock’s value.
    B) A company’s increasing earnings expectations.
    C) A company’s decreasing growth potential.
    D) A higher risk associated with the company.

58. The Dividend Discount Model (DDM) is best used for companies that:
    A) Have stable, predictable dividend payments.
    B) Are experiencing rapid growth.
    C) Have high debt levels.
    D) Do not pay dividends.

59. Which of the following methods is useful for valuing companies with unpredictable or no dividend payments?
    A) Dividend Discount Model (DDM).
    B) Price-to-Sales ratio.
    C) Discounted Cash Flow (DCF) model.
    D) Price-to-Earnings (P/E) ratio.

60. A company’s WACC represents:
    A) The average return required by all of its investors.
    B) The total value of the company’s assets.
    C) The growth rate of the company’s dividends.
    D) The risk-free rate of return.

61. In the Dividend Discount Model (DDM), what is the required rate of return based on?
    A) The market capitalization of the company.
    B) The risk-free rate and the company’s beta.
    C) The company’s net income.
    D) The stock’s price-to-earnings ratio.

62. If a company has a P/E ratio of 15 and an earnings per share (EPS) of $2, what is the stock price?
    A) $30
    B) $10
    C) $50
    D) $40

63. A company is expected to have free cash flow of $5 million, with a growth rate of 4% and a discount rate of 10%. What is the company’s enterprise value using the DCF model?
    A) $50 million
    B) $60 million
    C) $83 million
    D) $50 billion

64. The Price-to-Book (P/B) ratio is often used to evaluate:
    A) Companies in the technology sector.
    B) Companies that focus on physical assets.
    C) High-growth companies.
    D) Companies with substantial intangible assets.

65. The Gordon Growth Model (GGM) is a form of:
    A) Price-to-Sales ratio.
    B) Dividend Discount Model (DDM).
    C) Discounted Cash Flow (DCF) model.
    D) Earnings Multiple.

66. The price-to-earnings (P/E) ratio is best for evaluating which type of company?
    A) Startups with no earnings.
    B) Companies in growth sectors with low dividends.
    C) Stable companies with predictable earnings.
    D) Companies with fluctuating cash flows.

67. The Terminal Value (TV) in a DCF model is used to:
    A) Estimate the value of a company’s assets.
    B) Calculate the value of future dividends.
    C) Estimate the value of the company at the end of the projection period.
    D) Adjust for market conditions.

68. What is the main assumption of the Dividend Discount Model (DDM)?
    A) The company’s earnings will remain constant.
    B) The stock price is unaffected by dividends.
    C) Dividends will grow at a constant rate.
    D) The company’s dividend payout will decrease.

69. Which of the following ratios is calculated by dividing the company’s stock price by its earnings per share (EPS)?
    A) Price-to-Book (P/B) ratio.
    B) Price-to-Earnings (P/E) ratio.
    C) Price-to-Sales (P/S) ratio.
    D) Dividend Yield.

70. The free cash flow (FCF) method of valuation is preferred when:
    A) The company has irregular dividend payments.
    B) The company is highly leveraged with significant debt.
    C) The company has consistent dividend growth.
    D) The company has unpredictable cash flows.

71. If a company’s P/E ratio is low, it might indicate that:
    A) The stock is overvalued.
    B) The stock is undervalued or the company is facing challenges.
    C) The company is growing rapidly.
    D) The company is very profitable.

72. Which of the following best describes the relationship between the Price-to-Sales (P/S) ratio and a company’s valuation?
    A) A high P/S ratio indicates undervaluation.
    B) A high P/S ratio indicates that the company has high profit margins.
    C) A low P/S ratio indicates overvaluation.
    D) A low P/S ratio suggests a company may be undervalued.

73. In the Capital Asset Pricing Model (CAPM), the risk-free rate is represented by:
    A) The return of a government bond.
    B) The return of the stock market.
    C) The expected dividend yield.
    D) The stock’s earnings per share.

74. Which of the following is a major disadvantage of using the Price-to-Sales (P/S) ratio for stock valuation?
    A) It doesn’t account for the company’s debt.
    B) It is difficult to compare companies across different industries.
    C) It requires knowledge of future sales projections.
    D) It does not consider the company’s profitability.

75. The Dividend Discount Model (DDM) is best suited for valuing:
    A) Startups with no earnings.
    B) Companies with stable dividends.
    C) Technology companies with high growth potential.
    D) Companies with fluctuating cash flows.

76. Which valuation method is most appropriate for valuing companies in the financial sector?
    A) Price-to-Earnings (P/E) ratio.
    B) Price-to-Book (P/B) ratio.
    C) Price-to-Sales (P/S) ratio.
    D) Dividend Discount Model (DDM).

77. The Price-to-Sales (P/S) ratio is especially useful for evaluating:
    A) Growth companies with negative earnings.
    B) Established companies with predictable earnings.
    C) Companies with significant debt.
    D) Companies that pay no dividends.

78. Which of the following is true of a company with a high PEG ratio?
    A) The company has high earnings growth compared to its stock price.
    B) The company’s stock may be overvalued relative to its growth.
    C) The company is undervalued and has strong earnings potential.
    D) The company has no growth potential.

79. The Dividend Discount Model (DDM) is primarily used for:
    A) Companies with high volatility.
    B) Growth stocks with no dividends.
    C) Stable companies with consistent dividend payments.
    D) Companies with irregular dividend payments.

80. In the Discounted Cash Flow (DCF) method, the final terminal value is typically:
    A) A percentage of the company’s revenue.
    B) The net income expected for the company.
    C) The present value of expected future free cash flows.
    D) Calculated based on a multiple of earnings.

81. The Price-to-Earnings (P/E) ratio is calculated by dividing the stock price by:
    A) The company’s total revenue.
    B) The company’s net income.
    C) The company’s dividend yield.
    D) The company’s earnings per share (EPS).

82. The Terminal Growth Rate in a DCF model refers to:
    A) The rate at which dividends grow in the long term.
    B) The rate at which the company’s earnings grow indefinitely.
    C) The rate at which a company’s free cash flows decrease over time.
    D) The overall inflation rate expected for the company.

83. The Price-to-Earnings (P/E) ratio is used to determine the relationship between:
    A) Stock price and the company’s net income.
    B) Stock price and earnings per share (EPS).
    C) Stock price and the company’s assets.
    D) Stock price and total revenue.

84. The Gordon Growth Model assumes that:
    A) Earnings will grow at an exponential rate.
    B) Dividends will grow at a constant rate.
    C) Stock price will increase linearly over time.
    D) The company’s net income will grow rapidly.

85. If a company’s cost of equity is 8%, its growth rate is 5%, and its most recent dividend was $3, what is the intrinsic value of the stock using the Gordon Growth Model?
    A) $60
    B) $100
    C) $90
    D) $80

86. Which of the following is most likely to be valued using the Price-to-Sales (P/S) ratio?
    A) A stable, well-established company.
    B) A company with inconsistent earnings.
    C) A company with high debt-to-equity ratio.
    D) A company with large profit margins.

87. What is the major advantage of the Price-to-Book (P/B) ratio?
    A) It works well for companies with irregular earnings.
    B) It is useful for evaluating technology firms.
    C) It provides insight into a company’s valuation relative to its net asset value.
    D) It factors in the company’s growth rate.

88. A company has a free cash flow of $3 million, and the WACC is 7%. If the company’s growth rate is 4%, what is the company’s enterprise value?
    A) $60 million
    B) $75 million
    C) $85 million
    D) $100 million

89. What does the Price-to-Sales (P/S) ratio measure?
    A) The company’s sales compared to its stock price.
    B) The company’s price-to-book ratio.
    C) The company’s stock price relative to its total revenue.
    D) The company’s debt-to-equity ratio.

90. In a DCF model, the discount rate represents:
    A) The company’s expected future dividend yield.
    B) The risk-free rate plus the company’s beta.
    C) The rate at which cash flows are projected to grow.
    D) The company’s net income growth rate.

91. What does the Price-to-Earnings Growth (PEG) ratio account for that the P/E ratio does not?
    A) Earnings volatility.
    B) Growth rate of earnings.
    C) Dividend payouts.
    D) Asset value of the company.

92. Which of the following is an assumption of the Dividend Discount Model (DDM)?
    A) The company’s dividends will never change.
    B) The company’s stock price grows in line with earnings.
    C) Dividends will grow at a constant rate forever.
    D) The company’s debt will continue to increase.

93. In the context of the DCF model, the weighted average cost of capital (WACC) is used to:
    A) Calculate the company’s profitability.
    B) Adjust the terminal value.
    C) Discount the future free cash flows to the present value.
    D) Estimate the risk-free rate.

94. Which of the following is a limitation of the Price-to-Book (P/B) ratio?
    A) It ignores the company’s debt levels.
    B) It doesn’t account for intangible assets like goodwill.
    C) It doesn’t work for companies with high cash flow.
    D) It is too volatile to use for long-term valuation.

95. What is the key advantage of using the Price-to-Sales (P/S) ratio over the Price-to-Earnings (P/E) ratio?
    A) The P/S ratio works better for companies with fluctuating earnings.
    B) The P/S ratio is based on net income.
    C) The P/S ratio takes into account dividends.
    D) The P/S ratio is only relevant for tech companies.

96. What is the primary use of the Capital Asset Pricing Model (CAPM) in stock valuation?
    A) To calculate the intrinsic value of a stock.
    B) To estimate the required rate of return based on risk.
    C) To measure a company’s growth rate.
    D) To calculate the free cash flow of a company.

97. In the Dividend Discount Model (DDM), if the required rate of return is greater than the dividend growth rate, the stock price will:
    A) Increase indefinitely.
    B) Decrease and potentially become negative.
    C) Remain constant.
    D) Be positively correlated with the company’s earnings.

98. Which of the following methods is commonly used to value a startup company with no profits yet?
    A) Dividend Discount Model (DDM).
    B) Price-to-Book (P/B) ratio.
    C) Price-to-Earnings (P/E) ratio.
    D) Discounted Cash Flow (DCF) with projected free cash flows.

99. The Gordon Growth Model (GGM) is most applicable when valuing:
    A) Companies with volatile earnings.
    B) Companies with high growth rates.
    C) Companies that have stable dividend payments.
    D) Companies in emerging markets.

100. In the context of stock valuation, the terminal value is used to:
     A) Estimate the present value of future dividends.
     B) Reflect the future value of cash flows beyond the projection period.
     C) Determine the company’s dividend payout ratio.
     D) Estimate the company’s expected earnings growth.

101. When using the Dividend Discount Model (DDM), what happens if the growth rate exceeds the required rate of return?
     A) The stock price will grow exponentially.
     B) The model will produce an undefined or negative value.
     C) The model will produce an overestimated value.
     D) The model will remain unaffected.

102. In the Discounted Cash Flow (DCF) method, the projection period is used to:
     A) Forecast how much debt the company will incur.
     B) Estimate the company’s future earnings.
     C) Determine the company’s dividend payout ratio.
     D) Calculate the growth rate of future free cash flows.

103. If a company has a high Price-to-Earnings (P/E) ratio, it might suggest that the stock is:
     A) Undervalued relative to its earnings.
     B) Overvalued relative to its earnings.
     C) Likely to go bankrupt.
     D) Performing poorly in the market.

104. What does the Price-to-Book (P/B) ratio measure?
     A) The relationship between the company’s price and its book value.
     B) The relationship between market price and total revenue.
     C) The market’s perception of the company’s risk.
     D) The growth rate of the company’s book value.

105. Which of the following stock valuation methods is most appropriate for a company with negative earnings?
     A) Price-to-Earnings (P/E) ratio.
     B) Price-to-Sales (P/S) ratio.
     C) Dividend Discount Model (DDM).
     D) Price-to-Book (P/B) ratio.

106. In a Discounted Cash Flow (DCF) analysis, if the discount rate increases, the present value of future cash flows will:
     A) Increase.
     B) Decrease.
     C) Remain the same.
     D) Become negative.

107. The Price-to-Earnings (P/E) ratio can be used to compare:
     A) Companies in different industries with different growth rates.
     B) Companies within the same industry with similar growth prospects.
     C) The historical performance of the same company.
     D) A company’s debt levels to its stock price.

108. In the Dividend Discount Model (DDM), the stock price increases if:
     A) The dividend growth rate decreases.
     B) The required rate of return increases.
     C) The dividend amount increases.
     D) The company incurs higher debt.

109. Which of the following is a major disadvantage of the Dividend Discount Model (DDM)?
     A) It only works for companies that do not pay dividends.
     B) It assumes a constant growth rate, which is unrealistic for many companies.
     C) It is too complex to apply in real-world scenarios.
     D) It doesn’t account for market volatility.

110. If a company’s free cash flow is growing at a rate of 5%, and the company’s WACC is 8%, the terminal value in a DCF model will:
     A) Grow indefinitely at 5%.
     B) Be discounted at the WACC.
     C) Remain constant at the current cash flow level.
     D) Be zero.

111. The Price-to-Book (P/B) ratio is especially useful for evaluating:
     A) High-growth companies.
     B) Companies with significant tangible assets.
     C) Companies with high dividends.
     D) Companies in the technology sector.

112. When applying the Price-to-Sales (P/S) ratio, what does a high ratio typically suggest?
     A) The company has strong sales but poor profitability.
     B) The company’s stock price is low relative to its sales.
     C) The company has high earnings but low sales.
     D) The company’s stock is overvalued.

113. The Dividend Discount Model (DDM) is typically used for:
     A) High-growth startups with irregular cash flows.
     B) Established companies with stable dividends.
     C) Companies with fluctuating earnings.
     D) Technology companies with no dividends.

114. What is the primary goal of using stock valuation techniques like DCF, P/E, and P/B ratios?
     A) To predict stock prices accurately.
     B) To assess whether a stock is undervalued or overvalued.
     C) To determine the company’s dividend payout ratio.
     D) To calculate the stock’s historical return.

115. What does a low Price-to-Book (P/B) ratio indicate?
     A) The stock is overvalued relative to its book value.
     B) The stock is undervalued relative to its book value.
     C) The company has poor earnings performance.
     D) The stock is growing faster than its assets.

116. Which valuation method is most appropriate for valuing a company with steady growth and no debt?
     A) Dividend Discount Model (DDM).
     B) Price-to-Earnings (P/E) ratio.
     C) Price-to-Book (P/B) ratio.
     D) Discounted Cash Flow (DCF) analysis.

117. What does the Discounted Cash Flow (DCF) model discount?
     A) Historical stock prices.
     B) Future free cash flows.
     C) Market share of the company.
     D) The company’s liabilities.

118. In the Capital Asset Pricing Model (CAPM), the market risk premium refers to:
     A) The difference between the expected market return and the risk-free rate.
     B) The company’s earnings growth rate.
     C) The dividend payout ratio.
     D) The stock’s beta value.

119. Which of the following stock valuation methods would be most appropriate for a company with unpredictable earnings and no dividends?
     A) Price-to-Sales (P/S) ratio.
     B) Dividend Discount Model (DDM).
     C) Price-to-Earnings (P/E) ratio.
     D) Book Value per Share.

120. The P/E ratio is most useful when comparing companies within:
     A) Different industries.
     B) The same industry.
     C) Companies with high debt.
     D) Companies with no earnings.

121. If a stock has a higher Price-to-Earnings (P/E) ratio than its industry average, it might indicate:
     A) The stock is undervalued.
     B) The stock is overvalued.
     C) The company is experiencing financial distress.
     D) The company has stable earnings.

122. A stock’s market value is influenced by:
     A) Only the company’s net income.
     B) The company’s current debt levels.
     C) The market’s perception of the company’s future growth and risk.
     D) The historical stock prices.

123. What is the terminal value used for in a Discounted Cash Flow (DCF) model?
     A) To calculate a company’s debt value.
     B) To estimate the value of a company beyond the projection period.
     C) To find the company’s net income.
     D) To determine the stock’s dividend rate.

124. Which of the following factors is considered in the Price-to-Earnings (P/E) ratio?
     A) Total sales of the company.
     B) Company’s net income or earnings.
     C) Company’s total assets.
     D) Company’s dividend payments.

125. What does the term “beta” represent in the Capital Asset Pricing Model (CAPM)?
     A) The risk-free rate.
     B) The stock’s sensitivity to market movements.
     C) The market’s return.
     D) The expected dividend yield.

126. When using the Dividend Discount Model (DDM), what assumption is made about dividends?
     A) Dividends will grow at a constant rate forever.
     B) Dividends will increase at an irregular rate.
     C) Dividends will be paid for a limited time only.
     D) Dividends will remain constant at the current level.

127. What is one limitation of the Price-to-Earnings (P/E) ratio?
     A) It doesn’t account for changes in interest rates.
     B) It can be misleading for companies with irregular earnings or losses.
     C) It is irrelevant for companies in the financial sector.
     D) It only applies to small companies.

128. Which of the following is a drawback of using the Price-to-Book (P/B) ratio for stock valuation?
     A) It does not work for companies with significant intangible assets.
     B) It overestimates the value of companies with high earnings.
     C) It is only useful for large companies.
     D) It is difficult to calculate for startups.

129. The Free Cash Flow (FCF) method for stock valuation involves:
     A) Estimating the future dividends a company will pay.
     B) Calculating the earnings before interest and taxes (EBIT).
     C) Estimating the future free cash flows available to equity holders.
     D) Calculating the book value of a company’s assets.

130. Which of the following is most likely to cause a decrease in the intrinsic value of a stock calculated by the DCF method?
     A) A decrease in the company’s growth rate assumption.
     B) An increase in the company’s dividend payout ratio.
     C) A decrease in the stock’s market price.
     D) An increase in the company’s free cash flows.

131. When a company’s stock is trading below its intrinsic value, it is considered:
     A) Overvalued.
     B) Undervalued.
     C) Fairly valued.
     D) Irrelevant to the market.

132. What is a key advantage of using the Price-to-Sales (P/S) ratio over the Price-to-Earnings (P/E) ratio?
     A) It works well for companies with unpredictable earnings.
     B) It is based on a company’s book value.
     C) It accounts for dividend growth.
     D) It works only for companies with large market capitalization.

133. In the Discounted Cash Flow (DCF) model, a company’s future cash flows are discounted by:
     A) The company’s stock price.
     B) The risk-free rate.
     C) The weighted average cost of capital (WACC).
     D) The market risk premium.

134. Which method is best suited for valuing a company in a stable, mature industry with predictable dividends?
     A) Discounted Cash Flow (DCF) analysis.
     B) Dividend Discount Model (DDM).
     C) Price-to-Sales (P/S) ratio.
     D) Book Value per Share.

135. The Price-to-Book (P/B) ratio is most commonly used to value:
     A) High-growth companies.
     B) Companies with significant tangible assets.
     C) Companies in the technology sector.
     D) Companies with little or no debt.

136. A high Price-to-Earnings (P/E) ratio typically suggests that:
     A) The company is expected to grow at a high rate.
     B) The company’s earnings are decreasing.
     C) The stock price is undervalued.
     D) The company is highly leveraged.

137. What is the primary objective of stock valuation?
     A) To predict the stock’s price movement.
     B) To determine the intrinsic value of a stock.
     C) To assess a company’s dividend payout ratio.
     D) To forecast market trends.

138. Which of the following factors is NOT directly considered in the Discounted Cash Flow (DCF) valuation method?
     A) Company’s projected free cash flow.
     B) Company’s historical stock price.
     C) Company’s weighted average cost of capital (WACC).
     D) Company’s growth rate.

139. What is the relationship between the Price-to-Earnings (P/E) ratio and the company’s growth rate in the context of the Gordon Growth Model?
     A) The P/E ratio is inversely proportional to the growth rate.
     B) The P/E ratio is directly proportional to the growth rate.
     C) The P/E ratio has no effect on the growth rate.
     D) The P/E ratio is irrelevant in the Gordon Growth Model.

140. A stock is considered overvalued when:
     A) Its market value is less than its intrinsic value.
     B) The stock price is above its intrinsic value.
     C) The company’s earnings growth is declining.
     D) The company has significant liabilities.

141. What does the Price-to-Book (P/B) ratio primarily compare?
     A) The company’s book value to its market value.
     B) The company’s earnings to its book value.
     C) The company’s stock price to its sales revenue.
     D) The company’s dividends to its stock price.

142. In a Dividend Discount Model (DDM), what assumption is made about dividends?
     A) Dividends will remain constant indefinitely.
     B) Dividends will grow at a constant rate indefinitely.
     C) Dividends will increase by a random rate.
     D) Dividends will decline over time.

143. Which of the following is NOT an assumption made by the Capital Asset Pricing Model (CAPM)?
     A) All investors have the same expectations of future returns.
     B) There is a risk-free rate that investors can invest in.
     C) Markets are not efficient and information is asymmetric.
     D) Investors are rational and risk-averse.

144. In the context of the Price-to-Earnings (P/E) ratio, a high P/E ratio indicates:
     A) The stock is undervalued.
     B) The stock is likely to be overvalued.
     C) The company is experiencing high earnings growth.
     D) The company has low earnings growth.

145. What is the key advantage of using the Price-to-Sales (P/S) ratio for stock valuation?
     A) It is a good indicator of a company’s profitability.
     B) It is useful when earnings are negative or highly volatile.
     C) It accounts for the company’s debt levels.
     D) It shows how much market participants value the company’s assets.

146. The intrinsic value of a stock is the present value of all its future:
     A) Cash flows.
     B) Dividends.
     C) Revenues.
     D) Assets.

147. When valuing a company, which of the following methods is most likely to be used for high-growth companies that do not pay dividends?
     A) Dividend Discount Model (DDM).
     B) Price-to-Earnings (P/E) ratio.
     C) Price-to-Sales (P/S) ratio.
     D) Discounted Cash Flow (DCF) analysis.

148. In the Discounted Cash Flow (DCF) method, the free cash flows should be:
     A) Net income plus depreciation.
     B) The company’s expected earnings before interest and taxes (EBIT).
     C) The actual cash available after investments and working capital changes.
     D) Dividends distributed to stockholders.

149. In the Capital Asset Pricing Model (CAPM), what is the formula to calculate the expected return of an asset?
     A) Expected Return = Risk-Free Rate + Beta × (Market Return – Risk-Free Rate).
     B) Expected Return = Market Return × Beta.
     C) Expected Return = Dividend Yield + Growth Rate.
     D) Expected Return = Cost of Debt + Cost of Equity.

150. A company has a high P/E ratio relative to its peers, what does this most likely indicate?
     A) The company is expected to have a higher growth rate than its peers.
     B) The company’s stock is undervalued compared to its peers.
     C) The company has higher risk than its peers.
     D) The company’s earnings are expected to decline.

151. Which of the following is an important limitation of the Discounted Cash Flow (DCF) model?
     A) It only works for companies with predictable earnings.
     B) It relies heavily on the accuracy of assumptions regarding future cash flows.
     C) It is irrelevant for high-growth companies.
     D) It does not account for risk in the valuation process.

152. Which stock valuation method would be most appropriate for valuing a company with no earnings but significant future potential?
     A) Price-to-Book (P/B) ratio.
     B) Price-to-Sales (P/S) ratio.
     C) Dividend Discount Model (DDM).
     D) Free Cash Flow (FCF) model.

153. In the context of the Capital Asset Pricing Model (CAPM), what is the risk-free rate?
     A) The return on a risk-free asset, such as government bonds.
     B) The return on the market portfolio.
     C) The return on the company’s equity.
     D) The company’s cost of debt.

154. A company with a high Price-to-Sales (P/S) ratio is typically expected to:
     A) Have strong profitability.
     B) Experience low or negative sales growth.
     C) Be in a high-growth phase with increasing sales.
     D) Have substantial debt levels.

155. Which valuation method is most commonly used to value companies with consistent earnings and dividends?
     A) Discounted Cash Flow (DCF) analysis.
     B) Price-to-Sales (P/S) ratio.
     C) Dividend Discount Model (DDM).
     D) Price-to-Book (P/B) ratio.

156. Which of the following is true about the relationship between risk and return in stock valuation?
     A) Higher risk usually leads to higher expected returns.
     B) Lower risk generally results in higher returns.
     C) Risk and return are unrelated.
     D) Higher risk results in lower expected returns.

157. What is the main goal of using the Price-to-Earnings (P/E) ratio?
     A) To measure the market’s expectation of a company’s future growth.
     B) To evaluate a company’s liquidity.
     C) To calculate a company’s debt-to-equity ratio.
     D) To assess the profitability of a company’s dividends.

158. What does the Dividend Discount Model (DDM) assume about a company’s dividends?
     A) Dividends will grow at a constant rate indefinitely.
     B) Dividends will vary unpredictably over time.
     C) Dividends will decrease over time.
     D) Dividends will remain constant for the foreseeable future.

159. Which of the following methods is most useful for valuing a startup company that has no dividends and little or no earnings?
     A) Dividend Discount Model (DDM).
     B) Price-to-Earnings (P/E) ratio.
     C) Discounted Cash Flow (DCF) analysis.
     D) Price-to-Book (P/B) ratio.

160. What does a low Price-to-Book (P/B) ratio typically suggest about a company?
     A) The stock is overvalued.
     B) The stock is undervalued.
     C) The company is experiencing rapid growth.
     D) The company is highly profitable.

161. In the context of the Dividend Discount Model (DDM), what is the primary variable that influences the stock price?
     A) Dividend payout ratio.
     B) Discount rate.
     C) Earnings per share.
     D) Market capitalization.

162. When using the Price-to-Sales (P/S) ratio, a lower ratio generally suggests:
     A) The company has strong earnings growth.
     B) The stock is undervalued relative to its sales.
     C) The stock is overvalued relative to its sales.
     D) The company is highly profitable.

163. Which of the following would most likely cause a decrease in the value of a stock according to the Discounted Cash Flow (DCF) model?
     A) An increase in the company’s projected future cash flows.
     B) A decrease in the company’s discount rate.
     C) A decrease in the company’s projected future cash flows.
     D) An increase in the company’s growth rate.

164. A company has a beta coefficient of 1.5. This indicates that the company’s stock is:
     A) Less volatile than the overall market.
     B) More volatile than the overall market.
     C) Risk-free.
     D) Uncorrelated with the overall market.

165. In the context of the Capital Asset Pricing Model (CAPM), the “market return” is defined as:
     A) The return on a risk-free investment, such as government bonds.
     B) The return of an overall market index like the S&P 500.
     C) The expected return on a specific company’s stock.
     D) The return of a government bond.

166. What does the Dividend Discount Model (DDM) primarily assess in a company’s stock?
     A) The total market value of the company.
     B) The intrinsic value based on expected dividends.
     C) The relationship between stock price and earnings.
     D) The relationship between stock price and book value.

167. Which of the following does the Price-to-Earnings (P/E) ratio indicate?
     A) The level of risk associated with a stock.
     B) The relationship between the stock price and the company’s earnings.
     C) The company’s dividend yield.
     D) The company’s debt-to-equity ratio.

168. Which valuation model would be most appropriate for a company with a high and consistent growth rate in dividends?
     A) Dividend Discount Model (DDM).
     B) Price-to-Sales (P/S) ratio.
     C) Discounted Cash Flow (DCF) model.
     D) Price-to-Book (P/B) ratio.

169. When a company’s stock price is above its intrinsic value, the stock is considered:
     A) Undervalued.
     B) Overvalued.
     C) Fairly valued.
     D) Risk-free.

170. Which of the following would likely increase the valuation of a stock using the Dividend Discount Model (DDM)?
     A) An increase in the dividend payout.
     B) A higher required rate of return.
     C) A decrease in the company’s growth rate.
     D) A decrease in the stock’s beta.

171. The Price-to-Earnings (P/E) ratio can be calculated by dividing the stock price by:
     A) Earnings per share (EPS).
     B) Book value per share.
     C) Revenue per share.
     D) Dividend per share.

172. The Gordon Growth Model is an extension of which stock valuation model?
     A) Price-to-Earnings (P/E) ratio.
     B) Dividend Discount Model (DDM).
     C) Discounted Cash Flow (DCF) model.
     D) Price-to-Book (P/B) ratio.

173. Which of the following is a limitation of the Price-to-Sales (P/S) ratio as a stock valuation tool?
     A) It is not useful for high-growth companies.
     B) It does not consider a company’s profitability.
     C) It is difficult to calculate.
     D) It only applies to companies with negative earnings.

174. A stock with a high dividend yield is typically considered:
     A) To have strong future earnings potential.
     B) To be undervalued.
     C) To be less risky.
     D) To be undervalued relative to its earnings.

175. What does the Discounted Cash Flow (DCF) model rely on when projecting the value of a stock?
     A) Future dividends and earnings growth rates.
     B) Future stock price movements.
     C) Future cash flows and the appropriate discount rate.
     D) Current market conditions and trends.

176. The Price-to-Earnings (P/E) ratio is commonly used to evaluate stocks of companies that:
     A) Do not pay dividends.
     B) Have a consistent history of earnings.
     C) Are in the early stages of development.
     D) Have irregular or unpredictable earnings.

177. A company with a higher dividend payout ratio is likely to:
     A) Have a lower stock price.
     B) Have higher growth potential.
     C) Have a lower expected return.
     D) Be considered a mature or stable company.

178. If a company’s stock price is growing rapidly due to speculation rather than fundamentals, this may indicate:
     A) A high intrinsic value.
     B) A bubble in the stock price.
     C) Strong future earnings prospects.
     D) A low price-to-earnings (P/E) ratio.

179. Which of the following stock valuation methods is most commonly used for valuing companies with steady dividend payments and predictable earnings growth?
     A) Dividend Discount Model (DDM).
     B) Price-to-Earnings (P/E) ratio.
     C) Discounted Cash Flow (DCF) model.
     D) Price-to-Sales (P/S) ratio.

180. According to the Dividend Discount Model (DDM), an increase in the expected growth rate of dividends will:
     A) Decrease the stock’s value.
     B) Increase the stock’s value.
     C) Have no effect on the stock’s value.
     D) Make the stock price more volatile.

181. The Capital Asset Pricing Model (CAPM) helps determine the expected return of a stock based on:
     A) The company’s dividend history.
     B) The stock’s beta, market risk premium, and risk-free rate.
     C) The company’s price-to-earnings ratio.
     D) The company’s debt-to-equity ratio.

182. What does the beta coefficient in the Capital Asset Pricing Model (CAPM) represent?
     A) The market return of the stock.
     B) The risk-free rate of return.
     C) The stock’s volatility in relation to the market.
     D) The expected growth rate of dividends.

183. A higher Price-to-Earnings (P/E) ratio generally indicates that a stock is:
     A) Undervalued relative to its earnings.
     B) Overvalued relative to its earnings.
     C) Fairly priced relative to its earnings.
     D) In high demand but with uncertain future growth.

184. In the context of stock valuation, the Discounted Cash Flow (DCF) method primarily focuses on estimating:
     A) A company’s future cash flows and their present value.
     B) The earnings growth rate of the company.
     C) The stock price relative to market price.
     D) The company’s debt and equity balance.

185. The intrinsic value of a stock is defined as:
     A) The stock’s market price.
     B) The expected value of the stock based on projected future cash flows and risks.
     C) The amount paid by the company for acquiring another business.
     D) The historical value of the stock’s market price.

186. In stock valuation, a high Price-to-Book (P/B) ratio generally suggests that the stock is:
     A) Undervalued.
     B) Overvalued.
     C) Priced correctly according to its book value.
     D) High risk, low return.

187. Which of the following is most likely to result in a higher stock price according to the Dividend Discount Model (DDM)?
     A) A decrease in the required rate of return (discount rate).
     B) An increase in the risk-free rate of return.
     C) A decrease in future dividends.
     D) An increase in the market risk premium.

188. Which of the following methods would be most appropriate for valuing a company with volatile earnings and irregular dividends?
     A) Price-to-Book (P/B) ratio.
     B) Dividend Discount Model (DDM).
     C) Price-to-Earnings (P/E) ratio.
     D) Discounted Cash Flow (DCF) model.

189. The Price-to-Sales (P/S) ratio is considered useful for valuing:
     A) Companies with high profit margins.
     B) Startups with no profits.
     C) Established companies with stable earnings.
     D) Companies in the decline stage of their life cycle.

190. What is a common limitation of using the Dividend Discount Model (DDM) for stock valuation?
     A) It does not account for dividend growth.
     B) It is not applicable to companies that do not pay dividends.
     C) It does not account for market volatility.
     D) It requires historical price data.

191. A company has a low Price-to-Earnings (P/E) ratio and high dividend yield. This may indicate that:
     A) The stock is undervalued and offers attractive income potential.
     B) The company is struggling with growth prospects.
     C) The stock is overvalued compared to its earnings.
     D) The company has low cash flow.

192. The Dividend Discount Model (DDM) assumes that:
     A) Dividends will remain constant over time.
     B) Stock prices are only determined by the company’s earnings.
     C) Dividends will grow at a constant rate indefinitely.
     D) The company will stop paying dividends in the near future.

193. The Gordon Growth Model (a version of the DDM) can be applied to a company with:
     A) Constant dividend growth.
     B) High levels of debt.
     C) Negative earnings.
     D) No dividend payments.

194. What is the relationship between the required rate of return and stock price according to the Dividend Discount Model (DDM)?
     A) The required rate of return is inversely related to the stock price.
     B) The required rate of return has no effect on stock price.
     C) An increase in the required rate of return will decrease the stock price.
     D) An increase in the required rate of return will increase the stock price.

195. Which of the following would likely decrease the price of a stock according to the Dividend Discount Model (DDM)?
     A) An increase in the expected growth rate of dividends.
     B) A decrease in the required rate of return.
     C) A decrease in the expected dividends.
     D) A decrease in the market risk premium.

196. A company that is consistently growing its earnings and paying increasing dividends is likely to:
     A) Have a low Price-to-Earnings (P/E) ratio.
     B) Have a high Price-to-Earnings (P/E) ratio.
     C) Be undervalued according to the Dividend Discount Model.
     D) Be unaffected by stock market fluctuations.

197. A company with a negative Price-to-Earnings (P/E) ratio typically:
     A) Is experiencing high earnings growth.
     B) Is in the growth stage of its life cycle.
     C) Is unprofitable or has negative earnings.
     D) Has high dividend payouts.

198. The price-to-sales (P/S) ratio is more useful for valuing:
     A) High-growth companies that are not yet profitable.
     B) Mature companies with stable earnings.
     C) Companies with large amounts of debt.
     D) Companies with high dividend payouts.

199. A high dividend yield compared to its industry peers typically indicates:
     A) High future growth expectations.
     B) A strong, stable business.
     C) A company with potential financial difficulties.
     D) A company with low earnings volatility.

200. A stock with a Price-to-Book (P/B) ratio below 1 might be:
     A) Overvalued compared to its book value.
     B) Undervalued, suggesting it could be a bargain.
     C) At fair value, with no potential for price appreciation.
     D) A company with significant intangible assets.

201. When a company’s dividends grow at a constant rate, which stock valuation model is typically applied?
     A) Price-to-Earnings (P/E) ratio.
     B) Dividend Discount Model (DDM).
     C) Discounted Cash Flow (DCF) model.
     D) Capital Asset Pricing Model (CAPM).

202. According to the Gordon Growth Model (a variation of the Dividend Discount Model), if the required rate of return increases, the stock price will:
     A) Stay the same.
     B) Increase.
     C) Decrease.
     D) Become more volatile.

203. Which of the following would most likely decrease a stock’s valuation under the Discounted Cash Flow (DCF) method?
     A) An increase in the company’s projected free cash flows.
     B) A decrease in the risk-free rate.
     C) An increase in the required rate of return (discount rate).
     D) An increase in market sentiment.

204. The Price-to-Earnings (P/E) ratio is often used in the valuation of:
     A) Startups with no earnings.
     B) High-growth companies with unpredictable earnings.
     C) Mature companies with stable earnings.
     D) Companies with negative earnings.

205. A stock with a low P/E ratio and high dividend yield may indicate:
     A) The stock is overvalued.
     B) The stock is undervalued.
     C) A speculative company with little future growth.
     D) A company that is struggling with earnings.

206. A high dividend payout ratio might suggest that a company:
     A) Is reinvesting its earnings for future growth.
     B) Has few growth opportunities and is returning profits to shareholders.
     C) Is over-leveraged and unable to reinvest in its business.
     D) Is experiencing financial distress.

207. Which of the following methods is typically used for valuing a company with irregular earnings and no consistent dividend payments?
     A) Price-to-Sales (P/S) ratio.
     B) Dividend Discount Model (DDM).
     C) Price-to-Earnings (P/E) ratio.
     D) Discounted Cash Flow (DCF) model.

208. The Price-to-Book (P/B) ratio is most relevant for evaluating:
     A) Companies with high earnings growth.
     B) Real estate and asset-heavy companies.
     C) Technology companies with little tangible assets.
     D) Startups in the early stages of development.

209. In the Dividend Discount Model (DDM), the term “required rate of return” is often based on:
     A) The risk-free rate of return.
     B) The company’s debt-to-equity ratio.
     C) The stock’s historical performance.
     D) The company’s market capitalization.

210. The Dividend Discount Model (DDM) assumes that a company’s dividends grow at a:
     A) Constant rate forever.
     B) Random rate that fluctuates annually.
     C) Steady, cyclical rate.
     D) Declining rate.

211. A stock is undervalued when its price is:
     A) Above the intrinsic value estimated by valuation models.
     B) Equal to the intrinsic value estimated by valuation models.
     C) Below the intrinsic value estimated by valuation models.
     D) Based on speculative market sentiment.

212. Which of the following would likely cause a decrease in a stock’s price according to the Price-to-Earnings (P/E) ratio?
     A) An increase in expected future earnings.
     B) A decrease in the overall market’s P/E ratio.
     C) An increase in the company’s dividends.
     D) A decrease in the stock’s volatility.

213. A low P/E ratio could suggest that a stock is:
     A) Overvalued.
     B) Undervalued.
     C) Trading in line with industry norms.
     D) Riskier and less likely to provide future returns.

214. The Capital Asset Pricing Model (CAPM) is primarily used to estimate:
     A) The stock’s intrinsic value.
     B) The expected return based on systematic risk (beta).
     C) The company’s dividend yield.
     D) The stock’s price relative to its book value.

215. If a company’s stock price is lower than the value predicted by the Discounted Cash Flow (DCF) method, the stock may be considered:
     A) Overvalued.
     B) Fairly valued.
     C) Undervalued.
     D) Speculatively priced.

216. The Price-to-Sales (P/S) ratio is often most useful when valuing:
     A) High-growth companies with negative earnings.
     B) Companies with stable cash flow and mature earnings.
     C) Firms that have significant intangible assets.
     D) Firms that regularly pay dividends.

217. The Dividend Discount Model (DDM) assumes that the dividend payment will:
     A) Be constant indefinitely.
     B) Increase at a fixed rate.
     C) Decline at a fixed rate.
     D) Fluctuate randomly based on market conditions.

218. Which of the following factors would lead to a decrease in the intrinsic value of a stock according to the Dividend Discount Model?
     A) A decrease in the required rate of return.
     B) An increase in the dividend growth rate.
     C) A decrease in the dividend growth rate.
     D) A decrease in the stock price.

219. When using the Price-to-Book (P/B) ratio to value a stock, a P/B ratio of less than 1 typically indicates that:
     A) The stock is undervalued compared to its book value.
     B) The stock is overvalued and should be avoided.
     C) The company is experiencing high growth.
     D) The company’s tangible assets are more valuable than its stock price.

220. The Discounted Cash Flow (DCF) model is most useful for valuing:
     A) Companies with highly predictable free cash flows.
     B) Startups with no current earnings.
     C) Companies with unpredictable earnings and no dividends.
     D) Companies in industries with cyclical demand.

221. In the Dividend Discount Model (DDM), if the required rate of return exceeds the dividend growth rate, the stock’s price will:
     A) Be infinitely large.
     B) Be zero.
     C) Decrease.
     D) Increase.

222. A company’s stock is likely overvalued if its Price-to-Earnings (P/E) ratio is:
     A) Much higher than the average P/E ratio of its industry peers.
     B) Lower than its historical P/E ratio.
     C) Approximately equal to its historical P/E ratio.
     D) Lower than the required rate of return on equity.

223. A company with a high P/E ratio and low dividend yield is typically:
     A) A high-growth company with reinvestment opportunities.
     B) A company in decline with limited growth.
     C) An undervalued stock with good dividend potential.
     D) A company in a stable, mature industry.

224. The primary risk associated with the Dividend Discount Model (DDM) is that:
     A) It requires a constant growth rate for dividends, which may not be realistic.
     B) It does not consider the company’s cash flow.
     C) It assumes that dividends are the only factor in determining stock price.
     D) It is difficult to calculate without the use of a computer model.

225. Which of the following is a limitation of using the Price-to-Earnings (P/E) ratio for stock valuation?
     A) It is not applicable for companies with no earnings.
     B) It cannot be used for growth stocks.
     C) It assumes that earnings are not affected by market conditions.
     D) It ignores the company’s debt load.

226. Which of the following is a key difference between the Dividend Discount Model (DDM) and the Discounted Cash Flow (DCF) model?
     A) The DDM focuses on a company’s earnings, while the DCF focuses on dividends.
     B) The DCF model uses dividends as the sole input, while the DDM uses future cash flows.
     C) The DDM is limited to companies that pay consistent dividends, whereas the DCF can be used for any company.
     D) The DDM considers market conditions, whereas the DCF does not.

227. The Price-to-Sales (P/S) ratio is typically higher for:
     A) Companies with high operating margins and strong profitability.
     B) Startups or early-stage companies with negative earnings.
     C) Companies in the early stages of decline with declining revenues.
     D) Companies with a low growth rate.

228. In using the Price-to-Book (P/B) ratio for valuation, a ratio significantly higher than 1 may indicate:
     A) The company is undervalued relative to its tangible assets.
     B) The company is overvalued compared to its book value.
     C) The company is likely experiencing a period of declining earnings.
     D) The company has little debt or risk exposure.

229. Which of the following would most likely cause a decrease in a stock’s valuation according to the Discounted Cash Flow (DCF) method?
     A) An increase in free cash flow projections.
     B) A reduction in the discount rate (cost of capital).
     C) An increase in the company’s debt level.
     D) An increase in the company’s expected market share.

230. When valuing stocks of companies with stable earnings and predictable growth, the most commonly used stock valuation method is:
     A) The Price-to-Book (P/B) ratio.
     B) The Price-to-Sales (P/S) ratio.
     C) The Dividend Discount Model (DDM).
     D) The Earnings Yield method.

231. The Dividend Discount Model (DDM) can be used to value stocks of companies that:
     A) Have unpredictable cash flows.
     B) Pay consistent and predictable dividends.
     C) Have irregular dividend payouts.
     D) Do not pay dividends.

232. The Price-to-Earnings (P/E) ratio is useful when:
     A) Evaluating companies that do not pay dividends.
     B) Comparing companies within the same industry.
     C) Analyzing a startup in its early stages.
     D) Valuing companies with unpredictable earnings.

233. A company that has consistently high earnings and strong dividends is likely to have:
     A) A low Price-to-Earnings (P/E) ratio and a low dividend yield.
     B) A high Price-to-Earnings (P/E) ratio and a high dividend yield.
     C) A high Price-to-Earnings (P/E) ratio and a low dividend yield.
     D) A low Price-to-Earnings (P/E) ratio and a high dividend yield.

234. A high Price-to-Book (P/B) ratio typically indicates:
     A) The company is undervalued.
     B) The company has high tangible assets relative to its stock price.
     C) The company’s stock is expensive relative to its book value.
     D) The company is liquidating its assets.

235. The Price-to-Sales (P/S) ratio is best used when valuing:
     A) Established, profitable companies.
     B) Companies with large debts.
     C) High-growth companies that are not yet profitable.
     D) Companies with stable and predictable earnings.

236. In the Dividend Discount Model (DDM), a higher required rate of return typically leads to:
     A) A lower stock price.
     B) A higher stock price.
     C) No change in stock price.
     D) Increased dividend growth.

237. When the Discounted Cash Flow (DCF) model is applied, increasing the company’s future free cash flows will:
     A) Decrease the stock price.
     B) Increase the stock price.
     C) Have no effect on the stock price.
     D) Make the stock riskier.

238. The Dividend Discount Model (DDM) assumes that the company’s dividends will:
     A) Decrease at a constant rate.
     B) Grow at a constant rate indefinitely.
     C) Be paid at a fluctuating rate.
     D) Remain constant over time.

239. If a company has a high dividend payout ratio, it is likely:
     A) Reinvesting most of its earnings back into the business.
     B) Paying out a significant portion of earnings as dividends.
     C) Incurring high debt levels.
     D) Planning to reduce dividends in the future.

240. In a company with a low Price-to-Earnings (P/E) ratio, the stock might be considered:
     A) Overvalued.
     B) Undervalued.
     C) Riskier with higher expected returns.
     D) Less likely to grow.

241. Which of the following is an advantage of using the Price-to-Book (P/B) ratio for stock valuation?
     A) It can be used to value companies that are not yet profitable.
     B) It focuses on the company’s tangible assets, providing a clear valuation.
     C) It ignores the company’s financial structure.
     D) It relies on the company’s future earnings growth potential.

242. A company with a high Price-to-Book (P/B) ratio is likely to:
     A) Have significant intangible assets or intellectual property.
     B) Be undervalued compared to its book value.
     C) Have a very low level of debt.
     D) Have declining earnings and market share.

243. The Price-to-Sales (P/S) ratio is often used to value:
     A) High-dividend yielding companies.
     B) Companies in early stages of development without earnings.
     C) Companies with consistent, long-term earnings.
     D) Companies with high levels of debt.

244. When comparing the Price-to-Book (P/B) ratio of a company to its industry peers, a significantly higher P/B ratio suggests that:
     A) The stock is undervalued.
     B) The company’s stock is priced higher than its tangible assets suggest.
     C) The company is going through liquidation.
     D) The company has minimal tangible assets.

245. A company’s stock is considered overvalued if its Price-to-Sales (P/S) ratio is:
     A) Low relative to its peers.
     B) Similar to the market average.
     C) High relative to its peers.
     D) Lower than its historical average.

246. If a company’s Price-to-Earnings (P/E) ratio is significantly higher than its industry average, it could suggest:
     A) The company is undervalued relative to its peers.
     B) The company is experiencing rapid growth expectations.
     C) The company has lower future growth prospects.
     D) The stock is priced below its intrinsic value.

247. The Dividend Discount Model (DDM) is best suited for valuing stocks of companies that:
     A) Do not pay dividends.
     B) Have unstable earnings and cash flow.
     C) Have a consistent and predictable dividend growth.
     D) Are in the early stages of growth and reinvest profits.

248. The Price-to-Book (P/B) ratio is less useful for valuing:
     A) Asset-heavy companies.
     B) Financial companies.
     C) Technology companies with intangible assets.
     D) Real estate companies.

249. In the Discounted Cash Flow (DCF) model, increasing the discount rate will typically result in:
     A) An increase in stock price.
     B) No change in stock price.
     C) A decrease in stock price.
     D) A more accurate estimate of the stock’s intrinsic value.

250. Which of the following best describes the Dividend Discount Model (DDM)?
     A) It is suitable for valuing companies that pay inconsistent dividends.
     B) It calculates the value of a stock based on the present value of future dividends.
     C) It focuses on a company’s sales rather than its earnings.
     D) It relies on the company’s book value and financial statements.

251. The Price-to-Earnings (P/E) ratio is most useful for:
     A) Companies with irregular earnings.
     B) Comparing companies in different industries.
     C) Valuing growth companies with volatile earnings.
     D) Comparing companies in the same industry.

252. Which of the following is a limitation of the Price-to-Sales (P/S) ratio?
     A) It does not account for the company’s profitability.
     B) It is difficult to calculate.
     C) It is only useful for valuing startups.
     D) It ignores the company’s dividend payout.

253. A higher Price-to-Book (P/B) ratio may indicate that:
     A) The company’s stock is undervalued.
     B) The company has strong tangible assets.
     C) Investors are willing to pay a premium for the company’s intangible assets or growth prospects.
     D) The company’s book value is higher than its market value.

254. Which of the following stock valuation methods relies on the assumption that future dividends will grow at a constant rate?
     A) Price-to-Book (P/B) ratio.
     B) Dividend Discount Model (DDM).
     C) Price-to-Earnings (P/E) ratio.
     D) Discounted Cash Flow (DCF) model.

255. The main advantage of using the Price-to-Book (P/B) ratio is that it:
     A) Focuses on a company’s earnings potential.
     B) Accounts for the company’s debt levels.
     C) Gives a clear indication of a company’s profitability.
     D) Provides insights into the company’s valuation relative to its tangible assets.

256. Which of the following would most likely result in an increase in the intrinsic value of a stock under the Dividend Discount Model (DDM)?
     A) A decrease in the required rate of return.
     B) A decrease in the company’s dividend payout.
     C) A decrease in the dividend growth rate.
     D) An increase in the company’s debt levels.

257. A company’s stock price is typically most sensitive to changes in which of the following factors under the Discounted Cash Flow (DCF) model?
     A) Free cash flows.
     B) Historical earnings.
     C) Dividend payments.
     D) Market capitalization.

258. Which of the following is a disadvantage of using the Dividend Discount Model (DDM) for stock valuation?
     A) It is not applicable to companies that pay inconsistent or no dividends.
     B) It relies on the market price, which is hard to predict.
     C) It does not account for changes in the company’s debt.
     D) It cannot be used for growth companies.

259. The Price-to-Sales (P/S) ratio is best used for valuing companies that:
     A) Have negative or inconsistent earnings.
     B) Have predictable earnings and stable growth.
     C) Are in the process of liquidation.
     D) Have high levels of debt.

260. A company’s Price-to-Earnings (P/E) ratio can be misleading if:
     A) The company is not profitable.
     B) The company’s dividends are growing.
     C) The company has significant debt.
     D) The company is in a high-growth industry.

261. A high Dividend Yield may indicate that a company is:
     A) Reinvesting a significant portion of its earnings into the business.
     B) Paying out a larger portion of earnings as dividends.
     C) Likely to have slow growth and lower reinvestment opportunities.
     D) Facing financial distress.

262. The Price-to-Earnings (P/E) ratio is generally less useful for valuing:
     A) High-growth companies that are expected to have rapidly increasing earnings.
     B) Mature companies with stable and predictable earnings.
     C) Companies with irregular or negative earnings.
     D) Dividend-paying companies with stable cash flows.

263. When using the Dividend Discount Model (DDM) to value a stock, which of the following is an essential assumption?
     A) Dividends will remain constant indefinitely.
     B) Dividends will grow at a constant rate.
     C) The company’s earnings will decline over time.
     D) The market price will always follow the intrinsic value.

264. The Price-to-Sales (P/S) ratio can be useful for valuing companies in:
     A) Industries with high margins and low volatility.
     B) The startup phase, especially those without earnings.
     C) Companies with large tangible assets.
     D) Stable industries with mature earnings.

265. The Discounted Cash Flow (DCF) model estimates a company’s intrinsic value based on:
     A) Market capitalization.
     B) The present value of future cash flows.
     C) The company’s current stock price.
     D) Its historical earnings.

266. A low Price-to-Earnings (P/E) ratio in comparison to industry peers might suggest that:
     A) The company is undervalued.
     B) The company is overvalued.
     C) The company is expected to have higher future growth.
     D) The company has declining earnings prospects.

267. The main risk when applying the Dividend Discount Model (DDM) is that:
     A) It assumes dividends will grow at a constant rate, which may not be realistic.
     B) It requires accurate estimates of future earnings.
     C) It is only suitable for companies that do not pay dividends.
     D) It overemphasizes the importance of the required rate of return.

268. The Price-to-Book (P/B) ratio is best used to evaluate companies that:
     A) Are focused on growth and reinvestment.
     B) Have high levels of intangible assets and low physical assets.
     C) Have significant tangible assets relative to their stock price.
     D) Do not pay dividends.

269. The Price-to-Sales (P/S) ratio can be especially useful for evaluating:
     A) Companies in the technology sector with inconsistent earnings.
     B) Companies that have a stable dividend policy.
     C) Companies that are not yet profitable but have strong revenue growth.
     D) Companies with strong profit margins.

270. In the Dividend Discount Model (DDM), increasing the required rate of return will cause the stock price to:
     A) Increase.
     B) Decrease.
     C) Stay the same.
     D) Be unaffected by changes in the dividend growth rate.

271. Which of the following is a key assumption in the Dividend Discount Model (DDM)?
     A) The company’s future earnings will increase at an exponential rate.
     B) The stock will appreciate at a constant rate.
     C) The company will pay dividends indefinitely, with a constant growth rate.
     D) The stock price will be influenced by market sentiment alone.

272. A company with a low Price-to-Sales (P/S) ratio might indicate:
     A) The company is underperforming in the market.
     B) The company has high earnings potential.
     C) The stock is undervalued relative to its sales.
     D) The company is operating at a loss.

273. Which of the following is most likely to be affected by a company’s dividend payout under the Dividend Discount Model (DDM)?
     A) The stock’s market price.
     B) The company’s liquidity ratio.
     C) The earnings per share (EPS).
     D) The company’s asset management ratio.

274. When using the Discounted Cash Flow (DCF) model to value a company, which of the following is an important factor to estimate?
     A) Future revenue growth.
     B) The company’s dividend payout ratio.
     C) Current book value of assets.
     D) Market share of the company’s stock.

275. The Price-to-Book (P/B) ratio is useful for evaluating:
     A) Companies with a large number of intangible assets.
     B) Companies with substantial tangible assets relative to their stock price.
     C) High-growth companies that reinvest most of their earnings.
     D) Startups in the technology sector.

276. A high Price-to-Book (P/B) ratio may indicate that investors are:
     A) Valuing a company based on its tangible assets.
     B) Expecting future earnings growth and valuing intangible assets.
     C) Overvaluing the company based on historical data.
     D) Undervaluing the company in comparison to its assets.

277. When a company’s stock price increases due to a higher perceived future growth rate, which valuation model is most likely used?
     A) Price-to-Book (P/B) ratio.
     B) Dividend Discount Model (DDM).
     C) Price-to-Earnings (P/E) ratio.
     D) Discounted Cash Flow (DCF) model.

278. Which of the following statements is true about the Dividend Discount Model (DDM)?
     A) It is only applicable to companies with negative earnings.
     B) It assumes that dividends will grow at a constant rate.
     C) It is a more accurate model for high-growth companies than for stable companies.
     D) It ignores the company’s cost of capital.

279. The Price-to-Earnings (P/E) ratio of a company can be misleading when:
     A) The company’s earnings are volatile or negative.
     B) The company has a stable dividend payout.
     C) The company is highly diversified.
     D) The company has a low debt-to-equity ratio.

280. Which of the following would lead to an increase in a company’s intrinsic value according to the Discounted Cash Flow (DCF) model?
     A) An increase in free cash flows.
     B) A decrease in the company’s debt.
     C) An increase in the required rate of return.
     D) A decrease in the dividend payout.

281. A lower Price-to-Earnings (P/E) ratio relative to industry peers may suggest that the stock is:
     A) Overvalued.
     B) Undervalued, potentially due to market inefficiencies.
     C) In line with industry expectations.
     D) Likely to experience rapid earnings growth.

282. When evaluating a company’s stock using the Price-to-Book (P/B) ratio, a P/B ratio greater than 1 indicates that:
     A) The company’s market value exceeds its book value.
     B) The company’s book value is greater than its market value.
     C) The stock is undervalued.
     D) The company is in financial distress.

283. Which of the following stock valuation methods focuses on forecasting future free cash flows to equity holders?
     A) Dividend Discount Model (DDM).
     B) Price-to-Sales (P/S) ratio.
     C) Discounted Cash Flow (DCF) model.
     D) Price-to-Earnings (P/E) ratio.

284. Which of the following factors is most important when calculating the intrinsic value of a stock under the Dividend Discount Model (DDM)?
     A) The company’s past earnings performance.
     B) The company’s current stock price.
     C) The projected dividend growth rate.
     D) The company’s market capitalization.

285. A company with a high Price-to-Earnings (P/E) ratio relative to the industry average may suggest that:
     A) The stock is overvalued or that investors expect high future growth.
     B) The company has declining earnings and is struggling.
     C) The stock is undervalued, presenting a buying opportunity.
     D) The company is in a low-growth phase.

286. Which of the following is true about the Price-to-Sales (P/S) ratio?
     A) It is not useful for valuing companies with volatile earnings.
     B) It only works for companies with high profit margins.
     C) It is most effective for evaluating high-growth startups with little or no earnings.
     D) It is best used for mature, established companies with predictable earnings.

287. The Dividend Discount Model (DDM) assumes that the stock price is equal to:
     A) The sum of all future dividends discounted at the required rate of return.
     B) The expected earnings per share multiplied by the P/E ratio.
     C) The market capitalization divided by the number of shares outstanding.
     D) The net present value of future free cash flows.

288. In the context of stock valuation, the term “intrinsic value” refers to:
     A) The stock’s market price.
     B) The price at which the stock is currently trading.
     C) The estimated true value of the stock based on fundamental factors.
     D) The stock’s historical price.

289. Which of the following would likely lead to a decrease in a company’s Price-to-Book (P/B) ratio?
     A) An increase in the market value of the company’s assets.
     B) A decrease in the company’s debt levels.
     C) A significant write-off of intangible assets.
     D) An increase in the company’s dividend payout.

290. Which of the following is a limitation of the Price-to-Book (P/B) ratio?
     A) It is difficult to calculate.
     B) It may not accurately reflect the value of companies with significant intangible assets.
     C) It ignores the company’s profitability.
     D) It only works for companies with negative earnings.

291. The Price-to-Earnings (P/E) ratio is most useful for:
     A) Evaluating companies in industries with low growth potential.
     B) Comparing companies within the same industry or sector.
     C) Valuing companies with no earnings.
     D) Companies with high levels of debt.

292. When calculating the intrinsic value of a stock using the Dividend Discount Model (DDM), which of the following is NOT a necessary input?
     A) The expected dividend growth rate.
     B) The required rate of return.
     C) The company’s debt-to-equity ratio.
     D) The expected dividend payment.

293. Which of the following stock valuation methods is most appropriate for valuing a high-growth company that does not pay dividends?
     A) Dividend Discount Model (DDM).
     B) Price-to-Earnings (P/E) ratio.
     C) Discounted Cash Flow (DCF) model.
     D) Price-to-Book (P/B) ratio.

294. In the Price-to-Sales (P/S) ratio model, a lower P/S ratio might indicate:
     A) The company is overvalued.
     B) The company has a higher profit margin.
     C) The stock is undervalued in relation to its sales.
     D) The company has higher operating costs.

295. Which of the following is an advantage of using the Price-to-Earnings (P/E) ratio for stock valuation?
     A) It is unaffected by market conditions.
     B) It is particularly useful for valuing companies with stable earnings.
     C) It accounts for differences in capital structure.
     D) It works well for companies in industries with high variability in earnings.

296. A company with a high Dividend Yield may indicate:
     A) The company is in a high-growth phase.
     B) The stock price is undervalued or the company is distributing more of its earnings.
     C) The company is retaining most of its earnings for reinvestment.
     D) The company is facing liquidity problems.

297. What does a high Price-to-Earnings (P/E) ratio suggest about the company’s future prospects?
     A) The company is expected to experience slow earnings growth.
     B) Investors expect the company’s earnings to grow at a fast pace in the future.
     C) The company is undervalued by the market.
     D) The company is in financial distress.

298. In which of the following situations would the Dividend Discount Model (DDM) be least applicable?
     A) When valuing a company with consistent dividend payments and a stable growth rate.
     B) When valuing a company with no dividend history.
     C) When the company is in a high-growth stage with substantial reinvestment needs.
     D) When the company operates in a mature, slow-growth industry.

299. In the Discounted Cash Flow (DCF) model, which factor primarily determines the present value of future cash flows?
     A) The risk-free rate of return.
     B) The company’s future sales projections.
     C) The required rate of return (discount rate).
     D) The company’s market share.

300. Which of the following factors is most likely to increase a company’s Price-to-Book (P/B) ratio?
     A) A decrease in the company’s market value.
     B) An increase in the company’s tangible assets.
     C) A significant increase in the company’s earnings.
     D) A decrease in the company’s debt levels.

301. A company with a low Price-to-Book (P/B) ratio might be:
     A) Undervalued, suggesting it is a good investment opportunity.
     B) Overvalued due to excessive debt.
     C) Operating in a high-growth industry.
     D) Overstating its assets relative to its market value.

302. In the context of stock valuation, the term “free cash flow” refers to:
     A) Cash generated by the company after paying dividends.
     B) The company’s total cash reserves.
     C) Cash available to the company’s investors after all capital expenditures.
     D) Cash generated from the company’s core operations before tax.

303. Which of the following would most likely lead to an increase in the Price-to-Earnings (P/E) ratio?
     A) A decrease in the company’s earnings growth rate.
     B) A substantial increase in the company’s debt load.
     C) A rapid increase in the company’s earnings.
     D) A decrease in the company’s dividends.

304. The Price-to-Earnings Growth (PEG) ratio is used to:
     A) Adjust the P/E ratio for differences in earnings growth.
     B) Measure the company’s liquidity.
     C) Compare a company’s market capitalization to its book value.
     D) Evaluate the company’s dividend payout ratio.

305. The Price-to-Book (P/B) ratio is particularly useful for valuing companies in which of the following industries?
     A) Technology and biotechnology.
     B) Retail and consumer goods.
     C) Financial institutions and insurance companies.
     D) Service-based industries.

306. Which of the following is a disadvantage of using the Dividend Discount Model (DDM) for stock valuation?
     A) It cannot account for future growth projections.
     B) It is not applicable to companies with unpredictable or no dividends.
     C) It requires no knowledge of the company’s dividend history.
     D) It is dependent on the company’s capital expenditures.

307. The concept of “terminal value” in the Discounted Cash Flow (DCF) model refers to:
     A) The company’s value based on its earnings growth rate.
     B) The value of the company at the end of the forecasted period.
     C) The company’s book value at the time of the valuation.
     D) The value of the company’s assets that are expected to be sold.

308. Which of the following is NOT typically a factor considered when calculating the Discounted Cash Flow (DCF) model?
     A) The company’s future free cash flows.
     B) The company’s market capitalization.
     C) The discount rate.
     D) The terminal value of the company.

309. A company with a low Price-to-Sales (P/S) ratio compared to its competitors might indicate:
     A) The company has higher earnings potential relative to sales.
     B) The company is undervalued relative to its sales.
     C) The company has high debt levels compared to its sales.
     D) The company is overvalued relative to its sales.

310. In the context of stock valuation, the term “cost of equity” refers to:
     A) The rate of return required by shareholders to compensate for the risk of investing in the company.
     B) The rate of return expected on the company’s debt.
     C) The rate of return the company expects to achieve on its capital projects.
     D) The company’s dividend payout ratio.