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NEW QUESTION: 1
An analyst with Churn Brothers Brokerage is examining shares of the common stock of Nexis Pharmaceuticals. Consider the following information about Nexis' common stock:
Price per share: $98.73
Last dividend per share: $1.30
Expected growth rate: 12% per year
Required return: 11% per year
What is the value of Nexis' common stock? Choose the best answer.
A. The Infinite Period DDM will produce a nonsensical answer in this case.
B. $89
C. $130
D. $146
E. $110
Answer: A
Explanation:
Explanation/Reference:
Explanation:
The Infinite Period DDM will produce a nonsensical answer in this case because the required rate of return is less than the growth rate. This will lead to a negative answer for the value of Nexis Pharmaceutical common stock! The following equation illustrates the Infinite Period DDM:
{P0 = [D1 / (k - g)]}
Where: P0 = the price of the common stock at t0, D1 = the annual dividend at t1 (this is found by multiplying the dividend at t0 by (1 + expected growth rate), k = the required rate of return, and g = the anticipated growth rate.
As you can see, the Infinite Period DDM should not be used in this case, because the annual growth rate is in excess of the required rate of return. In this instance, the analyst should first reexamine his figures for the growth rate and required rate of return. If these figures are indeed accurate, then another method should be used to value the stock.

NEW QUESTION: 2
What are the characteristics of rule sets in rule based scores? (2)
A. They contain several scores
B. They contain several rules
C. They contain model fits within one score
D. They contain different target populations within one score
Answer: B,D

NEW QUESTION: 3
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A. Private
B. Classful
C. Multicast
D. Public
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