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:
![512_Model 2, 2a and 2b.jpg](https://secure.tutorsglobe.com/CMSImages/512_Model%202,%202a%20and%202b.jpg)
• 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:
![2058_Model 3, 3a and 3b.jpg](https://secure.tutorsglobe.com/CMSImages/2058_Model%203,%203a%20and%203b.jpg)
• 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.
![1880_Model 4.jpg](https://secure.tutorsglobe.com/CMSImages/1880_Model%204.jpg)
4. In your own words, what are the main conclusions for this article, and what could be improved upon in its analysis?