What are some implicit assumptions that are made when valuing a firm using multiples based on comparable firms?a.Industry is correctly valued.b.Same growth rates.c.Comparable firms have similar future prospects.d.No fundamental differences between firms.e.All of them.

Which of the following statements regarding comparable companies is (are) correct?Select one or more alternatives.We can regress valuation multiples on firm fundamentals to adjust for the difference in firm fundamentals.If we choose to use the EV/Sales multiple, a perfect comparable company must have identical historical after-tax operating margin, historical reinvestment rate, weighted-average cost of capital and historical growth rate.If we choose to use the EV/Sales multiple, a perfect comparable company must have identical expected after-tax operating margin, expected reinvestment rate, weighted-average cost of capital and expected growth rate.If we limit comparable companies to the same industry, we might end up with too few comparable companies.

All of the following are reasons why comparable companies analysis should be used in conjunction with other valuation methodologies EXCEPT: A. Markets may be skewed due to investor sentiment B. No two companies are the same C. Valuation methods may vary by sector D. Intrinsic valuation may be needed

Which of the following statements is FALSE?a.The most common valuation multiple is the price-earnings (P/E) ratio.b.The intuition behind the use of the P/E ratio is that when you buy a stock, you are in a sense buying the rights to the firm's future earnings and differences in the scale of the firms' earnings are likely to persist.c.A firm's P/E ratio is equal to the share price divided by its earnings per share.d.None of them.e.You should be willing to pay proportionally more for a stock with lower current earnings.

An industry composed of three firms, each of which considers the potential reactions of its rivals in making pricing decisions, yet is not concerned with the potential entry of other firms, can best be described as:Multiple Choicecompetitive monopolymonopolistic competitionan oligopolya monopolyperfect competition

3Which of the following statement(s) is (are) FALSE?Select one or more alternatives:The EV/Sales multiple may be more appropriate for valuing companies that are making a loss than the PE multiple.One possible disadvantage of using multiples to value a company is that the valuation derived is highly dependent on current market conditions.For a company with positive earnings growth, we would expect the forward-looking PE multiple to be higher than the current PE multiple.We can use multiples to determine whether an entire industry is overvalued or undervalued.