Reference no: EM131241909
Forecasting Model Questions
Prompt
Once you have read the article"Comparing the Accuracy and Explainability of Dividend, Free Cash Flow, and Abnormal Earnings Equity Value Estimates" and Chapters 6 and 7 of your text, review and complete the questions below. Use the article and your text to inform your responses to the questions below.
Assignment Questions:
1. For models 2, 2a, and 2b:
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• What is the best way to minimize the weighted average cost of capital?
• What is the effect of the weighted average cost of capital on the market value?
2. For models 3, 3a, and 3b:
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• What is the relationship between book value of equity and time t-1 and the market value of the equity?
3. Discuss model 4 and expand on the importance and the meaning of the market risk premium.
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4. In your own words, what are the main conclusions for this article, and what could be improved upon in its analysis?