9. Are these two statements correct? Statement 1: Because DDMs do not incorporate the cash flows...

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Finance

9. Are these two statements correct?
Statement 1: Because DDMs do not incorporate the cash flows toinvestors from repurchases, they
systematically understate the present value of future cash flowsfrom a stock and underestimate the
true rates of return, which should be based on total cashflows.
Statement 2: Some considerations that might argue against thecorporate use of repurchases are their lack
of transparency, potential unequal treatment of sellers andnonsellers, and their lesser ability
(compared to cash dividends) to discipline managers.
A. Both statements are correct.
B. Both statements are incorrect.
C. Only Statement 1 is correct.
D. Only Statement 2 is correct.

10. Are these two statements correct?
Statement 1: A stock with a high P/E ratio might be a growth stockand a stock with a high book-to-
market ratio might be a value stock.
Statement 2: From the net stock anomaly, on average we expect apositive stock reaction to an
announcement that the corporation will issue additional debt.
A. Both statements are correct.
B. Both statements are incorrect.
C. Only Statement 1 is correct.
D. Only Statement 2 is correct.

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9. Are these two statements correct?Statement 1: Because DDMs do not incorporate the cash flows toinvestors from repurchases, theysystematically understate the present value of future cash flowsfrom a stock and underestimate thetrue rates of return, which should be based on total cashflows.Statement 2: Some considerations that might argue against thecorporate use of repurchases are their lackof transparency, potential unequal treatment of sellers andnonsellers, and their lesser ability(compared to cash dividends) to discipline managers.A. Both statements are correct.B. Both statements are incorrect.C. Only Statement 1 is correct.D. Only Statement 2 is correct.10. Are these two statements correct?Statement 1: A stock with a high P/E ratio might be a growth stockand a stock with a high book-to-market ratio might be a value stock.Statement 2: From the net stock anomaly, on average we expect apositive stock reaction to anannouncement that the corporation will issue additional debt.A. Both statements are correct.B. Both statements are incorrect.C. Only Statement 1 is correct.D. Only Statement 2 is correct.