Sample Questions

**1. Which of the following is another name for the required return on a stock?**

A. Value.

B. Dividend payout ratio.

C. Retention ratio.

D. Discount rate.

**2. Which of the following best describes the constant-growth dividend discount model?**

A It is the formula for the present value of a finite, uneven cash flow stream.

B. It is the formula for the present value of a growing perpetuity.

C. It is the formula for the present value of an ordinary annuity.

D. It is the formula for the present value of a growing annuity.

**3. Which of the following do financial analysts consider least important when assessing the long-run economic and financial outlook of a company?**

A. General economic conditions.

B. Expected changes in EPS.

C. Prospects of the relevant industry.

D. Expected return on equity.

**4. Analysts commonly consider all of the following to be indicators that the market is overvalued except**

A. high average dividend yield.

B. high average P/E ratio.

C. high average ratio of stock prices to corporate sales.

D. high average price-to-book ratio.

**5. Which of the following is equal to the present value of all cash proceeds received by a stock investor?**

A. Value.

B. Discount rate.

C. Retention ratio.

D. Dividend payout ratio.

**Answers: 1 (D), 2 (B), 3 (A), 4 (A), 5 (A)**

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