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Concept Review Questions
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  1. What is the difference between the primary and secondary markets for a corporation's shares? (page 86)


  2. Write down the general DCF formula for the value of a stock? (pages 91)


  3. The present value of a stock should not depend on how long the investor expects to hold it. Explain why. (pages 91)


  4. If dividends are expected to grow at a constant rate forever, what is the value of the stock? (page 91)


  5. What is a two-stage DCF model? When would you want to use one? (pages 92-97)


  6. Suppose that a firm is investing and expanding rapidly. Does that necessarily mean that its shares are growth stocks? (pages 99-101)


  7. What is meant by PVGO? Why do the shares of companies with valuable PVGO trade at low earnings-price ratios? (page 99)


  8. Is the earnings-price ratio a good measure of the cost of equity? Why or why not? (page 99)


  9. Is free cash flow the same thing as earnings? (page 102)


  10. What is the standard valuation format used to value an operating business? (page 103)





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