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Test Bank For Valuation Measuring and Managing The Value of Companies 6th by Koller
Test Bank For Valuation Measuring and Managing The Value of Companies 6th by Koller
Ans: [c]
Response: []
4. Which of the following were fundamental flaws in the decisions made by participants in the
securitized mortgage market that contributed to its boom through 2007?
I. Leverage creates value.
II. Lower costs create value.
III. Diversification creates value.
IV. Lower cost of capital creates value.
a) I and II only.
b) I and III only.
c) II and III only.
d) III and IV only.
Ans: [b]
Response: []
6. Data from Europe and the United States found that the correlation between value creation and
employment in the company has been:
a) Positive.
b) Negative.
c) Essentially zero.
McKinsey/Valuation 2
Ans: [a]
Response: []
7. Paying attention to which of the following tends to lead to a company doing well in the stock market?
I. Growth.
II. Price-to-earnings ratio.
III. Earnings per share.
IV. Return on invested capital.
a) I and II only.
b) II and III only.
c) I and IV only.
d) II, III, and IV only.
Ans: [c]
Response: [The two sources of value creation are growth and return on invested capital.]
8. Which of the following was most responsible for the Internet boom and bust?
a) The Y2K bug.
b) Increased foreign competition.
c) A misapplication of the principle of leverage.
d) A single-minded focus on growth at any cost.
Ans: [d]
Response: [Managers assumed growth creates value while ignoring the fact that return on invested
capital must be above the cost of capital in order to create value.]
True/False
9. The faster companies can increase their revenues and deploy more capital at attractive rates of return,
the more value they create.
Ans: [True]
Response: []
McKinsey/Valuation 3
10. Relative to its ability to create value, managers tend to neglect changing capital structure.
Ans: [False]
Response: [Managers often use changes in capital structure and changes in accounting practices in an
attempt to create value, but both are generally ineffective.]
Multiple Choice
11. The empirical evidence shows that the link between the value created by the acquisition of another
company and earnings per share (EPS):
a) Is strong and positive.
b) Does not exist.
c) Is weak and negative.
d) Is strong and negative.
Ans: [b]
Response: []
True/False
12. Aggressive use of leverage is the theme that links most major financial crises.
Ans: [True]
Response: []
Short Answer
13. Explain the challenge competition plays in creating value in the long run and what this means for the
firm that wishes to create value in the long run.
Ans: [Competition tends to erode competitive advantages and, with them, returns on invested capital.
Therefore, companies must continually seek and exploit new sources of competitive advantage if they
McKinsey/Valuation 4
are to create long-term value. To that end, managers must resist short-term pressure to take actions that
create illusory value quickly at the expense of the real thing in the long term.]
McKinsey/Valuation 5
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Thammersiin. Hänestä tuntui että hän oli muuttunut varsin
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Sitten hän lisäsi hiljaa: Luulen että opin hiukan joka päivä —
teidän äidistänne!
*****
Hän meni nummelle sille paikalle missä Samuel Stern oli istunut
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Mieluummin hän kuunteli joen ääntä! Sillä oli luja tahtonsa, mutta
se ei ollut enää niin kiihkeä. Mitä se keväällä oli sanonut
hillittömyydessään, sen oli se jo unohtanut — — —
21.
Sitten hän jatkoi: — Halusin sanoa teille jotain. Nyt luulen voivani
tehdä sen. Mehän olemme ystävät — eikö niin?
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Hänen äänensä sointi oli käynyt lempeäksi. Thorasta oli, kuin olisi
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*****
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