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State whether true or false
The earnings yield method and dividend growth model should give similar values for a company.
Market capitalisation represents the maximum value for a company. ( What represents maximum value of a company then?)
The PE ratio should be increased if the company being valued is riskier than the valuing company.
All the above statements are False and there is no explanation for them.
Can you please explain?
The earnings yield method only looks at the current earnings. The dividend growth model looks at expected future dividends.
The market capitalisation is just the total value of the shares on the stock exchange. That depends on shareholders expectations and the value may increase or decrease in the future. It is impossible to ever know what the maximum value in the future will be.
The PE ratio is only affected if the acquiring company expects to be able to manage the company better and make it more profitable in the future.
Have you watched my free lectures on all of this?
Yes, I have watched but the statements seemed a bit confusing.
Thank you so much
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