FIN 534 Week 1 Homework Chapter 2

FIN 534 Week 1 Homework Chapter 2

FIN/534 Week 1 Homework Chapter 2

FIN 534 – Homework Chapter 2

1. Which of the following statements is CORRECT?

a. Typically, a firm’s DPS should exceed its EPS.

b. Typically, a firm’s EBIT should exceed its EBITDA.

c. If a firm is more profitable than average (e.g., Google), we would normally expect to see its stock price exceed its book value per share.

d. If a firm is more profitable than most other firms, we would normally expect to see its book value per share exceed its stock price, especially after several years of high inflation.

e. The more depreciation a firm has in a given year, the higher its EPS, other things held constant.

2. Which of the following statements is CORRECT?