Group 13 (23-BSA-02)

1. It is an alternative in method for calculating intrinsic value

a. Comparative analysis
b. Dividend cash flow model
c. Economic Value Added
d. Market Value Added
2. It return is the “hurdle rate” needed by equity shareholders to invest in the company’s
shares
a. Effective interest rate
b. Dividend growth rate
c. Required rate of return
d. Nominal rate
3. It is the projected rate of annual growth which in case of Gordon growth model it is
assumed constant
a. Dividend per share
b. Rate of return
c. Expected dividend growth rate
d. Growth model
4. If the calculated share price is less than the current market price, the shares are
considered?
a. Overvalued
b. Undervalued
c. Overvalued and undervalued
d. Overvalued or undervalued
5. Oreo Company has the following information :
Dividend per share for the following year– $11
The required rate of return – 9%
Growth rate – 4%
Find out the stock price of Oreo Company.
a. 200
b. 215
c. 220
d. 225

6. I. The Gordon Growth Model can result in a negative value if the required rate of return
is smaller than the growth rate.
II. Stocks are likely to be overvalued under Gordon Growth Model despite a company’s
brand and steady growth.

a) Statement 1 is false and statement 2 is true

 b) Statement 1 is true and statement 2 is false
c) Both statements are true
d) Both statements are false

7. The Gordon Growth Model can be used to determine the relationship between :
a) growth rates, interest rates, and valuation.
b) growth rates, effective rate, and valuation.
c) growth rates, discount rates, and valuation.
d) growth rates, return on investment, and valuation.

8. Why is it okay to value a company using dividends when other valuation techniques rely
on earnings or cash flows?
a) It is actually valuing cash flows wherein profits and cash flows will eventually be paid out
as dividends once the company matures.
b) Future dividends will grow at a constant rate and will continue forever
c) Stocks are clearly valued despite a company’s brand and steady growth.
d) It calculates the fair value of a stock irrespective of the prevailing market conditions

9. If the required rate of return is __________the growth rate of dividends per share, the
result value is negative.
a) greater than
b) equal to
c) less than
d) zero

10. The value per share approaches infinity once the required rate of return _____ growth
rate.
a) >
b) <
c) </=
d) =

11. Statement I: Gordon Growth Model assumes that the company’s business model is
always unstable.
Statement II: The Company’s free cash flow is paid as cash.

A. Only statement-I is correct

B. Only statement-II is correct
C. Both the statements are correct
D. Both the statements are incorrect
 12. Statement I: The company has stable financial leverage
Statement II: The company grows at a constant, changing rate
A. Only statement-I is correct
B. Only statement-II is correct
C. Both the statements are correct
D. Both the statements are incorrect

13. He is an American economist, who popularized Gordon Growth Model in the 1960s.
A. Myron J. Gadon
B. Myroon J. Gordon
C. Myron J. Gordon
D. Tyroon J. Gordon
14. It is otherwise known as Dividend Discount Model
A. Gordon Growth Model
B. Absolute Value
C. Required Rate of Return
D. Corporate Bond Valuation
15. Gordon Growth Model is a stock valuation method that calculates a stock’s intrinsic value. 
A. False
B. Maybe
C. True
D. None of the above
Prepared by:
GARCIA, Pia C.
FERRER, Jianny Izza
LOPEZ, Daisy B.