Kwaza asks Khan to investigate the most appropriate models for valuing utility companies. She tells Khan about the following points mentioned in various research reports on the utilities sector.
Report 1: A resurgence in domestic manufacturing activity will generate long-term growth in earnings and dividends that exceeds the cost of equity.
Report 2: Share repurchases are expected to increase. The report expresses confidence in the forecasts regarding the magnitude and timing of these repurchases.
Report 3: The report forecasts earnings growth of 4.5%. The key growth drivers are increases in population and business creation associated with stable GDP growth of 2.75%.
Q. Which sector report best describes a situation in which the Gordon growth model could be used to value utility stocks?
.Report 1
.Report 2
.Report 3
Solution
B is correct because the Gordon growth model can accurately value companies that are repurchasing shares when the analyst can appropriately adjust the dividend growth rate for the impact of share repurchases.
为什么选REPORT2?
REPORT1不选的原因是因为G>R? report3不选的原因是因为公司的增长率不能高于GDP的？
report2中股票回购跟用GGM有什么必然关系？
