Concept explainers
True/false True or false?
- a. All stocks in an equivalent-risk class are priced to offer the same expected
rate of return . - b. The value of a share equals the PV of future dividends per share.
a)
To discuss: Whether the statement is true or false.
Explanation of Solution
Given statement:
Mostly all the stock which have same equivalent risk are always priced to provide similar expected rate of return.
Justification:
The given statement is true all the stocks which have equivalent risk are priced to provide similar expected rate of mainly the market risk.
Hence, the statement is true.
b)
To discuss: Whether the statement is true or false.
Explanation of Solution
Given statement:
Value of a share is equal to the present value of future dividend per share
Justification:
It is true that value of a share is equal to the present value of future dividend per share
Hence, the statement is true.
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Chapter 4 Solutions
Principles of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
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