Question 1

The dividend payout ratio for the aggregate market is 55 percent,the required rate of return is 15 percent,and the expected growth rate for dividends is 7 percent.Compute the current earnings multiple.

Accepted Answer

P/E = Payout ¸ (k - g)= .55 ¸ (.15 - .07)= 6.88

Question 2

You are attempting to estimate expected earnings per share for a major stock market series.You have determined an appropriate estimate for sales per share.Which of the following methods can be used to estimate the profit margin?

Accepted Answer

All the methods mentioned can be used to estimate the profit margin by considering different aspects of the company's financial performance.

Question 3

If,for the S&P Industrials Index,the profit margin was 0.20 and the equity turnover ratio was 13,the ROE would be:

Accepted Answer

ROE = (Profit Margin)× (Equity Turnover)= (0.20)(13)= 2.6

Question 4

Which of the following economic series is not included in the National Bureau of Economic Research (NBER)coincident economic indicator group?

Accepted Answer

The National Bureau of Economic Research (NBER) coincident economic indicator group includes the following series: employees on nonagricultural payrolls, personal income less transfer payments, industrial production, and manufacturing and trade sales. Total value of commercial loans is not included in this group.

Question 5

Which of the following economic series is not included in the National Bureau of Economic Research (NBER)lagging indicator group?

Accepted Answer

The number of employees on nonagricultural payrolls is considered a coincident indicator, not a lagging indicator.

Question 6

Aggregate return on equity increases as

Accepted Answer

The answer of Aggregate return on equity increases as
...

Question 7

The multiplier approach for estimating the intrinsic market value of a major stock market series requires the following step(s):

Accepted Answer

The multiplier approach involves estimating future earnings per share and the appropriate earnings multiplier, as well as considering long-run required rates of return and growth rates to determine the intrinsic market value.

Question 8

All of the following factors affect the required rate of return except

Accepted Answer

The required rate of return is determined by a variety of factors, including the economy's risk-free rate, corporate business risk, country risk, and expected rate of inflation. However, the return on equity is not a factor that affects the required rate of return. Instead, it is one of the components of the required rate of return calculation when using the Capital Asset Pricing Model (CAPM).

Question 9

When applying the earnings multiplier model all of the following will cause the required rate of return,k,to change except

Accepted Answer

Changes in the retention rate will affect the earnings growth rate but not the required rate of return. All of the other factors listed (real risk free rate, rate of inflation, and risk premium for common stock) will affect the required rate of return and therefore change the earnings multiplier model.

Question 10

The growth rate will most likely increase if the:

Accepted Answer

A decrease in the payout ratio means more earnings are retained in the company, which can be reinvested to generate growth, thus potentially increasing the growth rate.

Question 11

If,for the S&P Industrials Index,the profit margin was .25 and the equity turnover ratio was 12,the ROE would be:

Accepted Answer

ROE = (Profit Margin)× (Equity Turnover)= (0.25)(12)= 3.0

Question 12

If,for the S&P Industrials Index,the profit margin was 0.35 and the equity turnover ratio was 10,the ROE would be:

Accepted Answer

ROE = (Profit Margin)× (Equity Turnover)= (0.35)(10)= 3.5

Question 13

The growth rate (g)of dividends is affected by all of the following except

Accepted Answer

The growth rate of dividends is primarily influenced by the retention rate, financial leverage, total asset turnover, and net profit margin, as these factors directly affect a company's ability to generate and retain earnings for growth. The required return is related to investor expectations and does not directly impact the growth rate of dividends.

Question 14

Which of the following economic series is not included in the National Bureau of Economic Research (NBER)leading indicator group?

Accepted Answer

The Index of industrial production is a coincident indicator, not a leading indicator.

Question 15

Unit labor costs,the rate of inflation,the level of foreign competition,and the unemployment rate were variables tested by Finkel and Tuttle as determinants of the

Accepted Answer

The answer of Unit labor costs,the rate of inflation,the level...

Question 16

A 1971 study by Finkel and Tuttle hypothesizes that all of the following variables affect the aggregate profit margin except

Accepted Answer

Variable labor costs are typically considered a component of unit labor costs, which are already listed as a separate factor. The study likely distinguishes between broader economic factors and specific cost components.

Question 17

If,for the S&P Industrials Index,the profit margin was 0.30 and the equity turnover ratio was 11,the ROE would be:

Accepted Answer

ROE = (Profit Margin)× (Equity Turnover)= (0.30)(11)= 3.3

Question 18

A microeconomic estimate of the market earnings multiple requires an estimate for which of the following variables?

Accepted Answer

A microeconomic estimate of the market earnings multiple typically requires an estimate of the dividend payout ratio, return on equity, and the real risk-free rate (RFR), as these factors influence the valuation of earnings.

Question 19

Which of the following is not a determinant of the aggregate gross profit margin?

Accepted Answer

The growth rate of M2 money supply is not a determinant of the aggregate gross profit margin.

Question 20

Which of the following is not a major variable that affects the aggregate stock market earning multiplier in a country?

Accepted Answer

The composite debt to equity ratio for firms in a country is a variable that affects the cost of capital for companies, but it does not directly affect the aggregate stock market earning multiplier. The other variables listed (required rate of return, expected growth rate of dividends, and dividend-payout ratio) all directly affect the multiplier. Therefore, the correct answer is D, as it is not a major variable that affects the aggregate stock market earning multiplier in a country.

Quiz 12: Macroanalysis and Microvaluation of the Stock Market

The dividend payout ratio for the aggregate market is 55 percent,the required rate of return is 15 percent,and the expected growth rate for dividends is 7 percent.Compute the current earnings multiple.

You are attempting to estimate expected earnings per share for a major stock market series.You have determined an appropriate estimate for sales per share.Which of the following methods can be used to estimate the profit margin?

If,for the S&P Industrials Index,the profit margin was 0.20 and the equity turnover ratio was 13,the ROE would be:

Which of the following economic series is not included in the National Bureau of Economic Research (NBER) coincident economic indicator group?

Which of the following economic series is not included in the National Bureau of Economic Research (NBER) lagging indicator group?

Aggregate return on equity increases as

The multiplier approach for estimating the intrinsic market value of a major stock market series requires the following step(s) :

All of the following factors affect the required rate of return except

When applying the earnings multiplier model all of the following will cause the required rate of return,k,to change except

The growth rate will most likely increase if the:

If,for the S&P Industrials Index,the profit margin was .25 and the equity turnover ratio was 12,the ROE would be:

If,for the S&P Industrials Index,the profit margin was 0.35 and the equity turnover ratio was 10,the ROE would be:

The growth rate (g) of dividends is affected by all of the following except

Which of the following economic series is not included in the National Bureau of Economic Research (NBER) leading indicator group?

Unit labor costs,the rate of inflation,the level of foreign competition,and the unemployment rate were variables tested by Finkel and Tuttle as determinants of the

A 1971 study by Finkel and Tuttle hypothesizes that all of the following variables affect the aggregate profit margin except

If,for the S&P Industrials Index,the profit margin was 0.30 and the equity turnover ratio was 11,the ROE would be:

A microeconomic estimate of the market earnings multiple requires an estimate for which of the following variables?

Which of the following is not a determinant of the aggregate gross profit margin?

Which of the following is not a major variable that affects the aggregate stock market earning multiplier in a country?