10 Questions
What are the three common approaches taken in finance for valuation?
Discounted cashflow valuation, relative valuation, and contingent claim valuation
What is a subjective exercise in finance?
Valuation
What are some reasons for which valuations may be needed?
Investment analysis, capital budgeting, merger and acquisition transactions, financial reporting
What are some common terms for the value of an asset or liability?
Market value, fair value, and intrinsic value
In a business valuation context, what is used to determine the hypothetical price that a third party would pay for a given company?
Various techniques
What does the dividend discount model (DDM) attempt to calculate?
The fair value of a stock irrespective of the prevailing market conditions
What theory is the dividend discount model (DDM) based on?
The value of a company is the present worth of the sum of all of its future dividend payments
What determines the value of a company according to the dividend discount model (DDM)?
The present worth of the sum of all of its future dividend payments
If the value obtained from the DDM is higher than the current trading price of shares, what does it indicate?
The stock is undervalued and qualifies for a buy
What does the DDM take into consideration when calculating the fair value of a stock?
Dividend payout factors and the market expected returns
Test your knowledge of finance valuation with this quiz! Explore the three main approaches - discounted cashflow valuation, relative valuation, and contingent claim valuation. Challenge yourself with questions on valuing assets, investments, and securities.
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