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Exam 12: Macroanalysis and Microvaluation of the Stock Market

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Question 41

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Expected earnings per share estimates requires all of the following except

A) A sales per share estimate.
B) A GDP estimate.
C) An aggregate operating profit margin estimate
D) An estimate of the real risk-free rate.
E) A tax rate estimate.

F) A) and E)
G) A) and D)

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Question 42

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Which of the following is not a reason given for why forecaster are so often incorrect?

A) There is a temptation for economic forecasters to stay fairly close to the "norm," that is, "group think."
B) Many analysts are simply too short-sighted.
C) Economists and economic forecaster often suffer from information overload.
D) Some economic forecasters are too broad-minded, trying to include a number of ideas in their forecasts.
E) None of the above (that is, all are reasons cited for why forecasters are often incorrect)

F) A) and B)
G) B) and D)

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Question 43

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Which of the following is not normally associated with cyclical indicators?

The dividend payout ratio for the aggregate market is 55 percent, the required rate of return is 15 percent, and the expected growth rate for dividends is 7 percent. Compute the current earnings multiple.

In well developed economies, markets are not affected by changes in expected inflation.

The dividend payout ratio for the aggregate market is 65 percent, the required rate of return is 12 percent, and the expected growth rate for dividends is 6 percent. Compute the current earnings multiple.

An increase in the retention ratio will cause a decrease in the growth rate.

The economic factor assumed to be closely related to stock prices is productivity.

It is more important to estimate future earnings than the future earnings multiplier.

The growth rate will most likely increase if the:

One of the economic series included in the National Bureau of Economic Research (NBER) coincident indicator is the index of industrial production.

Recent studies indicate that one can earn excess returns in the stock market by forecasting unanticipated changes in the money supply.

Changes in the dividend payout ratio are positively related to changes in the retention rate.

The dividend payout ratio for the aggregate market is 50 percent, the required rate of return is 16 percent, and the expected growth rate for dividends is 6 percent. Compute the current earnings multiple.

Which of the following are not cyclical indicators?

A microeconomic estimate of the market earnings multiple requires an estimate for which of the following variables?

Which of the following economic series is not included in the National Bureau of Economic Research (NBER) lagging indicator group?

Exhibit 12.7 USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) You are using the free cash flow to equity (FCFE) technique to analyze U.S. equity market. The beginning FCFE is $90 and the required rate of return is 10%. Free cash flows are expected to grow at a 10% rate for the next two years and then grow at a constant rate of 7% forever. -Compute the current earnings multiple if the dividend payout ratio for the aggregate market is 60 percent, the required rate of return is 11%, and the dividend growth rate is 8%.

Stock prices move coincidentally with the economy.

Which of the following economic series is not included in the National Bureau of Economic Research (NBER) coincident economic indicator group?