Institute of Chartered Financial Analysts of India (ICFAI) University 2006 Certification Finance Security Analysis-I - Question Paper

(c) The terminal price computed in this model is derived from Gordon model

(d) This model is best suited to those firms which have a high growth rate in the beginning and a gradual decline in the growth rate over a period of time

(e) This model assumes high-growth period and stable-growth period for valuing a stock.
< ans >

14.
Anurag Industries Ltd. has a stable growth of 4%. It pays out 50% of its earnings as dividends. The ROE for the company in the beginning of the year was 12%. The needed rate of return is 11%. The price to book value ratio (P/BV) for the firm is

(a) 0.32 (b) 0.42 (c) 0.89 (d) 3.43 (e) 3.57.
< ans >

15.
The earnings of AML Software Ltd. are expected to grow at 22%. The company has capital expenditure and depreciation of Rs.22.20 and Rs.10.20 per share respectively. The increase in working capital is Rs.6.00 per share. Capital expenditure, depreciation and working capital are expected to grow at the identical rate as the earnings. The debt ratio of the firm is 20%. The discount rate is 10%. The 2nd year current value of free cash flow to equity ratio for AML Software Ltd. is Rs.12.90 per share. The current EPS per share for the company is

(a) Rs.15 (b) Rs.18 (c) Rs.24 (d) Rs.30 (e) Rs.32.
< ans >

16.
Which of the subsequent statements are actual with respect to Point and Figure charts (PFC)?

I. A PFC does not have time dimension.

II. A PFC measures every movement in price.

III. The decision about the size of a point is essentially based on price range.

IV. The decision about the size of a point is essentially based on volatility of the stock.

(a) Both (I) and (III) above

(b) Both (II) and (IV) above

(c) (I), (II) and (III) above

(d) (I), (III) and (IV) above

Earning:   Approval pending.