What are examples of work products?

::Meeting agendas and minutes

::Interview questions and notes

::Facilitation session agendas and notes

::Issues log

::Work plan, status reports

::Presentation slides used during the project

::Traceability matrices

What is the definition of a work product?

Answer: A document or collection of notes or diagrams used by the business analyst during the requirements development process

What are the elements of Prepare Requirements Package?

There are 2:

::Work Products and Deliverables

::Format

What task consumes the requirements package?

Answer: Communicate Requirements

What is the value of the Business Analysis Communication Plan as an input to Prepare Requirements Package?

Answer: It will describe the stakeholder groups, their communication needs, and define whether a single requirements package or multiple requirements packages are required.

What are the inputs to the Prepare Requirements Package task?

There are 4:

::Business Analysis Communication Plan

::Org Process Assets

::Requirements

::Requirements Structure

What are the forms of requirements packages?

There are 3:

::Formal Documentation

::Presentation

::Models

Misunderstanding of requirements will adversely affect what?

Answer: Solution Implementation

The Prepare Requirements Package task is part of what knowledge area?

Answer: Requirements Management & Communication

What are some reasons for creating a requirements package?

::early assessment of quality and planning

::evaluation of possible alternatives

::formal reviews and approvals

::inputs to solution design

::conformance to contractual and regulatory obligations

::maintenance for re-use

What is the proper level of detail to present for requirements in a requirements package?

Answer: That which is needed for the team to understand the content, and no more

What is the purpose of Prepare Requirements Package?

Answer: To select and structure a set of requirements in an appropriate fashion to ensure that the requirements are effectively communicated to, understood by, and usable by a stakeholder group or groups

What is an example of an ongoing requirement?

::Contractual obligations (SLAs)

::Quality standards

::Business rules/standards

What are ongoing requirements?

Answer: Those requirements that an organizational unit is required to be able to meet on a continuous basis

How are reusable requirements used by Enterprise Architecture and Future Initiatives?

Answer: Enterprise Architecture would typically include term requirement types into a data dictionary. Other requirement types can be used across projects in future initiatives to replicate portions of functionality that is Communication on to multiple areas

Reusable requirements are consumable where?

Answer: Enterprise Architecture and Future Initiatives

What are the two inputs to Maintain Requirements for Re-Use task/activity?

Answer: Organizational process assets and Requirements

What occurs in the Maintain Requirements for Re-Use task/activity?

Answer: To identify requirements that are good candidates for long-term usage

What is the purpose of the Maintain requirements for Re-Use task/activity?

Answer: To manage the knowledge of requirements following their implementation

What is a coverage matrix?

Answer: A table or spreadsheet used to manage tracing. Also called a trace matrix. Used when there are few requirements.

What is a Configuration Management System?

Answer: A specialized tools that is generally used to trace large volumes of requirements

Why is traceability useful in performing impact analysis?

Answer: Because when requirements change and they are linked to other requirements, the related items are identified as a result of the link, as well as potential changes in the relationship

What is the Value type of requirement relationship?

Answer: When including a requirement affects the desirability of a related requirement (increase or decrease)

What is the Cover type of requirement relationship?

Answer: When a requirement completely includes another requirement. It is a subset in which the top-level requirement is the sum of the sub-requirements

What are the 5 type of relationships between requirements?

::Necessity

::Effort

::Subset

::Cover

::Value

Why are relationships an element of Manage Requirements Traceability?

Answer: Knowing dependent relationships between requirements can help determine the sequence of when each will be addressed

What task/activity consumes traced requirements?

Answer: Manage Solution Scope and Requirements

What are the inputs to the Manage Requirements Traceability task/activity?

Answer: Requirements and the Requirements Management Plan

What is the overall goal of requirements traceability?

Answer: To requirements, solution components are linked directly or indirectly back to the original business objectives

What is used to potentially find missing functionality or identify unrequested functionality?

Answer: Requirements traceability

What is the value of traceability?

Answer: It helps ensure conformation to the overall solution for each individual requirements and assists is scope and change Management

What does requirements traceability define?

Answer: Lineage of requirements, including backwards and forwards traceability.

What is the purpose of managing requirements traceability?

Answer: To create and maintain relationships between business objectives, requirements, other deliverables

What are the techniques used to Manage Solution Scope and requirements?

Answer: Base lining and Signoff

What's the difference between a formal and informal requirements presentation to stakeholders?

Answer: One is formal written specification with possible walk-thru and the other is possibly verbal or email Communication

What are the elements of the Manage Solution Scope & Requirements task/activity?

::Solution Scope Management

::Conflict and Issue Management

::Presenting Requirements for Review

::Approval

The Requirements Management Plan is an input to the Requirements Management and Communication knowledge area. Why?

Answer: It is used to define the process to be followed in managing the solution scope and the requirements

How is the solution scope used to manage change in the Requirements Management and Communication knowledge area?

Answer: All requested changes to requirements are assessed against the solution scope to ensure of alignment

Why is the solution scope carried forward into the Requirement Management and Communication knowledge area?

Answer: To ensure that the requirements conform to the approved solution scope

What should the requirements do in order to be approved?

Answer: Support the solution scope

What is base lining?

Answer: In essence, the approval of a set of requirements (in this context) that allows no change to occur to the set without a way to control change

What occurs during the Manage Solution Scope and Requirements task/activity?

::Securing approval of requirements

::Management of issues from elicitation

What is the purpose of the Manage Solution Scope and Requirements task/activity?

Answer: To obtain consensus among stakeholders on overall solutions scope

What are the outputs from the tasks/activities in the Requirements Management and Communication knowledge area?

There are 5

::Approved Requirements

::Traced Requirements

::Communicated Requirements

::Maintained and Reusable Requirements

::Requirements Package

What are the inputs into the Requirements Management and Communication knowledge area tasks/activities?

There are 6

::BA Communication Plan

::Organizational process assets

::Requirements

::Requirements Management Plan

::Solution Scope

::Stakeholder List/Responsibilities

What are the tasks/activities of the Requirements Management and Communication knowledge area?

There are 5

::Manage Solution Scope

::Manage Requirements traceability

::Manage Requirements for Re-Use

::Prepare Requirements Package

::Communication Requirements

Performance of all Requirements Management and Communication activities is governed by what?

Answer: Business Analysis plan

Communication of requirements does what for stakeholders?

Answer: Brings them to a Communication on understanding

What does the Requirements Management and Communication knowledge area describe?

Answer: The activities and considerations for managing and expressing requirements to a broad audience

What tasks consume CONFIRMED stakeholder concerns?

There are 3

::Define Business Case

::Define Assumptions and Constraints

::Assess Organizational Readiness

 What tasks consume CONFIRMED requirements?

Answer: 

There are 4

::Define Business Need

::Prioritize Requirements

::Specify and Model Requirements 

::Define Transition Requirements

What are the outputs of the Confirm Elicitation Results task?

Answer: Requirements and Stakeholder Concerns, both confirmed

What are two techniques that are used to confirm elicitation results?

Answer: Interviews and Observation

One advantage to using the price/book value (P/B) ratio over using the price/earnings (P/E) ratio is that P/B can be used when:

A) earnings or cash flows are negative.

B) stock markets are volatile.

C) the firm is in a slow growth phase.

Answer: A

Which of the following is a disadvantage of using the price-to-book value (PBV) ratio?

A) Book value may not mean much for manufacturing firms with significant fixed costs.

B) Firms with negative earnings cannot be evaluated with the PBV ratios.

C) Book values are affected by accounting standards, which may vary across firms and countries.

Answer: C

An argument against using the price-to-sales (P/S) valuation approach is that:

A) P/S ratios are not as volatile as price-to-earnings (P/E) multiples.

B) sales figures are not as easy to manipulate or distort as earnings per share (EPS) and book value.

C) P/S ratios do not express differences in cost structures across companies.

Answer: C

An argument against using the price-to-earnings (P/E) valuation approach is that:

A) research shows that P/E differences are significantly related to long-run average stock returns.

B) earnings power is the primary determinant of investment value.

C) earnings can be negative.

Answer: C

An argument against using the price to cash flow (P/CF) valuation approach is that:

A) non-cash revenue and net changes in working capital are ignored when using earnings per share (EPS) plus non-cash charges as an estimate.

B) cash flows are not as easy to manipulate or distort as EPS and book value.

C) price to cash flow ratios are not as volatile as price-to-earnings (P/E) multiples.

Answer: A

One advantage of price/sales (P/S) multiples over price to earnings (P/E) and price-to-book value (PBV) multiples is that:

A) P/S is easier to calculate.

B) P/S can be used for distressed firms.

C) Regression shows a strong relationship between stock prices and sales.

Answer: B

Which of the following is NOT an advantage of using price-to-book value (PBV) multiples in stock valuation?

A) Book values are very meaningful for firms in service industries.

B) Book value is often positive, even when earnings are negative.

C) PBV ratios can be compared across similar firms if accounting standards are consistent.

Answer: A

Which of the following is least likely an advantage of using price/sales (P/S) multiple?

A) P/S multiples provide a meaningful framework for evaluating distressed firms.

B) P/S multiples are more reliable because sales data cannot be distorted by management.

C) P/S multiples are not as volatile as P/E multiples and hence may be more reliable in valuation analysis.

Answer: B

Regarding the estimates required in the constant growth dividend discount model, which of the following statements is most accurate?

A) Dividend forecasts are less reliable than estimates of other inputs.

B) The model is most influenced by the estimates of "k" and "g."

C) The variables "k" and "g" are easy to forecast.

Answer: B

Gwangwa Gold, a South African gold producer, has as its primary asset a mine which is shown on the balance sheet with a value of R100 million. An analyst estimates the market value of this mine to be 90% of book value. The company's balance sheet shows other assets of R20 million and liabilities of R40 million, and the analyst feels that the book value of these items reflects their market values. Using the asset-based valuation approach, what should the analyst estimate the value of the company to be?

A) R80 million.

B) R70 million.

C) R110 million.

Answer: B

An analyst studying Albion Industries determines that the average EV/EBITDA ratio for Albion's industry is 10. The analyst obtains the following information from Albion's financial statements:

EBITDA = ￡11,000,000

Market value of debt = ￡30,000,000

Cash = ￡1,000,000

Based on the industry's average enterprise value multiple, what is the equity value of Albion Industries?

A) ￡110,000,000.

B) ￡80,000,000.

C) ￡81,000,000.

Answer: C

Of the following types of firm, which is most suitable for P/B ratio analysis?

A) A firm with accounting standards consistent to other firms.

B) A firm with accounting standards different from other firms.

C) A service industry firm without significant fixed assets.

Answer: A

One advantage of using price-to-book value (PBV) multiples for stock valuation is that:

A) it is a stable and simple benchmark for comparison to the market price.

B) most of the time it is close to the market value.

C) book value of a firm can never be negative.

Answer: A

Which of the following statements regarding price multiples is most accurate?

A) A disadvantage of the price/book value ratio is that it is not an appropriate measure for firms that primarily hold liquid assets.

B) An advantage of the price/sales ratio is that it is meaningful even for distressed firms.

C) A rationale for using the price/cash flow ratio is that there is only one clear definition of cash flow.

Answer: B

The price to book value ratio (P/BV) is a helpful valuation technique when examining firms:

A) with older assets compared to those with newer assets.

B) with the same stock prices.

C) that hold primarily liquid assets.

Answer: C

Which of the following is least likely a reason the price to cash flow (P/CF) model has grown in popularity?

A) CFs are generally more difficult to manipulate than earnings.

B) CFs are used extensively in valuation models.

C) CFs are more easily estimated than future dividends.

Answer: C

Which of the following is a disadvantage of using price-to-sales (P/S) multiples in stock valuations?

A) It is difficult to capture the effects of changes in pricing policies using P/S ratios.

B) P/S multiples are more volatile than price-to-earnings (P/E) multiples.

C) The use of P/S multiples can miss problems associated with cost control.

Answer: C

Which of the following is NOT an assumption of the constant growth dividend discount model (DDM)?

A) The growth rate of the firm is higher than the overall growth rate of the economy.

B) Dividend payout is constant.

C) ROE is constant.

Answer: A

Which of the following statements about the constant growth dividend discount model (DDM) in its application to investment analysis is least accurate? The model:

A) is best applied to young, rapidly growing firms.

B) can't be applied when g > K.

C) is inappropriate for firms with variable dividend growth.

Answer: A

Which of the following statements concerning security valuation is least accurate?

A) The best way to value a company with no current dividend but who is expected to pay dividends in three years is to use the temporary supernormal growth (multistage) model.

B) A firm with a $1.50 dividend last year, a dividend payout ratio of 40%, a return on equity of 12%, and a 15% required return is worth $18.24.

C) The best way to value a company with high and unsustainable growth that exceeds the required return is to use the temporary supernormal growth (multistage) model.

Answer: B

The constant-growth dividend discount model would typically be most appropriate in valuing a stock of a:

A) rapidly growing company.

B) new venture expected to retain all earnings for several years.

C) moderate growth, "mature" company.

Answer: C

A firm will not pay dividends until four years from now. Starting in year four dividends will be $2.20 per share, the retention ratio will be 40%, and ROE will be 15%. If k = 10%, what should be the value of the stock?

A) $41.32.

B) $55.25.

C) $58.89.

Answer: A

Assume that a stock paid a dividend of $1.50 last year. Next year, an investor believes that the dividend will be 20% higher and that the stock will be selling for $50 at year-end. Assume a beta of 2.0, a risk-free rate of 6%, and an expected market return of 15%. What is the value of the stock?

A) $45.00.

B) $40.32.

C) $41.77.

Answer: C

Assuming the risk-free rate is 5% and the expected return on the market is 12%, what is the value of a stock with a beta of 1.5 that paid a $2 dividend last year if dividends are expected to grow at a 5% rate forever?

A) $12.50.

B) $17.50.

C) $20.00.

Answer: C

Use the following information and the dividend discount model to find the value of GoFlower, Inc.'s, common stock.

Last year's dividend was $3.10 per share.

The growth rate in dividends is estimated to be 10% forever.

The return on the market is expected to be 12%.

The risk-free rate is 4%.

GoFlower's beta is 1.1.

A) $34.95.

B) $121.79.

C) $26.64.

Answer: B

Given the following information, compute the implied dividend growth rate.

Profit margin = 10.0%

Total asset turnover = 2.0 times

Financial leverage = 1.5 times

Dividend payout ratio = 40.0%

A) 4.5%.

B) 18.0%.

C) 12.0%.

Answer: B

Use the following information and the multi-period dividend discount model to find the value of Computech's common stock.

Last year's dividend was $1.62.

The dividend is expected to grow at 12% for three years.

The growth rate of dividends after three years is expected to stabilize at 4%.

The required return for Computech's common stock is 15%.

Which of the following statements about Computech's stock is least accurate?

A) At the end of two years, Computech's stock will sell for $20.64.

B) Computech's stock is currently worth $17.46.

C) The dividend at the end of year three is expected to be $2.27.

Answer: B

An analyst has gathered the following data for Webco, Inc:

Retention = 40%

ROE = 25%

k = 14%

Using the infinite period, or constant growth, dividend discount model, calculate the price of Webco's stock assuming that next years earnings will be $4.25.

A) $63.75.

B) $55.00.

C) $125.00.

Answer: A

What is the value of a stock that paid a $0.25 dividend last year, if dividends are expected to grow at a rate of 6% forever? Assume that the risk-free rate is 5%, the expected return on the market is 10%, and the stock's beta is 0.5.

A) $17.67.

B) $16.67.

C) $3.53.

Answer: A

Which of the following statements concerning security valuation is least accurate?

A) A stock to be held for two years with a year-end dividend of $2.20 per share, an estimated value of $20.00 at the end of two years, and a required return of 15% is estimated to be worth $18.70 currently.

B) A stock with a dividend last year of $3.25 per share, an expected dividend growth rate of 3.5%, and a required return of 12.5% is estimated to be worth $36.11.

C) A stock with an expected dividend payout ratio of 30%, a required return of 8%, an expected dividend growth rate of 4%, and expected earnings of $4.15 per share is estimated to be worth $31.13 currently.

Answer: B

Given the following estimated financial results, value the stock of FishnChips, Inc., using the infinite period dividend discount model (DDM).

Sales of $1,000,000.

Earnings of $150,000.

Total assets of $800,000.

Equity of $400,000.

Dividend payout ratio of 60.0%.

Average shares outstanding of 75,000.

Real risk free interest rate of 4.0%.

Expected inflation rate of 3.0%.

Expected market return of 13.0%.

Stock Beta at 2.1.

The per share value of FishnChips stock is approximately: (Note: Carry calculations out to at least 3 decimal places.)

A) Unable to calculate stock value because ke < g.

B) $17.91.

C) $26.86.

Answer: C

An equity valuation model that values a firm based on the market value of its outstanding debt and equity securities, relative to a firm fundamental, is a(n):

A) asset-based model.

B) market multiple model.

C) enterprise value model.

Answer: C

If an analyst estimates the intrinsic value for a security that is different from its market value, the analyst should most likely take an investment position based on this difference if:

A) many analysts independently evaluate the security.

B) the model used is not highly sensitive to its input values.

C) the security lacks a liquid market and trades infrequently.

Answer: B

An analyst gathered the following information about a company:

The stock is currently trading at $31.00 per share.

Estimated growth rate for the next three years is 25%.

Beginning in the year 4, the growth rate is expected to decline and stabilize at 8%.

The required return for this type of company is estimated at 15%.

The dividend in year 1 is estimated at $2.00.

The stock is undervalued by approximately:

A) $15.70.

B) $6.40.

C) $0.00.

Answer: B

Which of the following firms would most appropriately be valued using an asset-based model?

A. An energy exploration firm in financial distress that owns drilling rights for offshore area.

B. A paper firm located in a country that is experiencing high inflation.

C. A software firm that invests heavily in research and development and frequently introduces new products.

Answer: A

Which of the following is least likely a rationale for using price multiples?

A. Price multiples are easily calculated.

B. The fundamental P/E ratio is insensitive to its inputs.

C. The use of forward values in the divisor provides an incorporation of the future.

Answer: B

Which of the following firms would most likely be appropriately valued using the constant growth DDM?

A. An auto manufacturer.

B. A producer of bread and snack foods.

C. A biotechnology firm in existence for two years.

Answer: B

A firm has an expected dividend payout ratio of 60% and an expected future growth rate of7%. What should the firm's fundamental price-to-earnings (P/E) ratio be if the required rate of return on stocks of this type is 15%?

A. 5.0x.

B. 7.5x.

C. lO.Ox.

Answer: B

An analyst feels that Brown Company's earnings and dividends will grow at 25% for two years, after which growth will fall to a constant rate of 6%. If the projected discount rate is 10%, and Brown's most recently paid dividend was $1, the value of Brown's stock using the multistage dividend discount model is closest to:

A. $31.25.

B. $33.54.

C. $36.65.

Answer: C

Assume that a stock is expected to pay dividends at the end of Year 1 and Year 2 of $1.25 and $1.56, respectively. Dividends are expected to grow at a 5% rate thereafter. Assuming that kt is 11%, the value of the stock is closest to:

A. $22.30.

B. $23.42.

C. $24.55.

Answer: C

The XX Company paid a $1 dividend in the most recent period. The company is expecting dividends to grow at a 6% rate into the future. What is the value of this stock if an investor requires a 15% rate of return on stocks of this risk class?

A. $10.60.

B. $11.11.

C. $11.78.

Answer: C

Next year's dividend is expected to be $2, g = 7%, and k = 12%. What is the stock's intrinsic value?

A. $28.57.

B. $40.00.

C. $42.80.

Answer: B

What is the intrinsic value of a company's stock if dividends are expected to grow at 5%> the most recent dividend was $1, and investors' required rate of return for this stock is 10%?

A. $20.00.

B. $21.00.

C. $22.05.

Answer: B

The constant growth model requires which of the following?

A. g < k.

B. g > k.

C. g k.

Answer: A

What would an investor be willing to pay for a share of preferred stock that pays an annual $7 dividend if the required return is 7.75%?

A. $77.50.

B. $87.50.

C. $90.32.

Answer: C

An analyst estimates that a stock will pay a $2 dividend next year and that it will sell for $40 at year-end. If the required rate of return is 1 5%, what is the value of the stock?

A. $33.54.

B. $36.52.

C. $43.95.

Answer: B

An analyst estimates a value of $45 for a stock with a market price of $50. The analyst is most likely to conclude that a stock is overvalued if:

A. few analysts follow the stock and the analyst has less confidence in his model inputs.

B. few analysts follow the stock and the analyst is confident in his model inputs.

C. many analysts follow the stock and the analyst is confident in his model inputs.

Answer: B