Bart Wiley，CFA，agreed in writing with his former employer not to solicit former clients for a period of one year after his termination. After he left his former employer， he consulted with a lawyer about whether the agreement was legally enforceable. The lawyer advised Wiley that it was doubtful that the agreement could be enforced， so Wiley sent a marketing brochure about his new firm to his former clients. According to the Standards of Practice Handbook， which of the following statements is most accurate with respect to Wiley‘s conduct？
A. The Standards do not apply to Wiley’s conduct.
B. The Standards require Wiley to comply with the agreement with his former employer.
C. Because Wiley relied upon the opinion of legal counsel， he did not violate the Standards.
金程cfa解析：--Demonstrate a thorough knowledge of the Code of Ethics and Standards of Professional Conduct by applying the Code and Standards to specific situations presenting multiple issues of questionable conduct.
2.Which of thefollowing is least likely an advantage of using price/sales (P/S) multiple?
A)P/S multiples aremore reliable because sales data cannot be distorted by management.
B)P/S multiplesprovide a meaningful framework for evaluating distressed firms.
C)P/S multiples arenot as volatile as P/E multiples and hence may be more reliable in valuationanalysis.
金程cfa解析：Accounting data onsales is used to calculate the P/S multiple. The P/S multiple is thought to bemore reliable because sales figures are not as easy to manipulate as theearnings and book value, both of which are significantly affected by accountingconventions. However, it is not true that "sales data cannot be distortedby management" because aggressive revenue recognition practices caninfluence reported sales.
3. An analystgathered the following data for the Parker Corp. for the year ended December31, 2005:
§EPS2005 = $1.75
§Dividends2005 = $1.40
§Beta Parker = 1.17
§Long-term bond rate = 6.75%
§Rate of return S&P 500 = 12.00%
The firm is expectedto continue their dividend policy in future. If the long-term growth rate inearnings and dividends is expected to be 6%, the forward P/E ratio for ParkerCorp. will be:
金程cfa解析：The required rate ofreturn on equity for Parker will be 12.89% = 6.75% + 1.17(12.00% ? 6.75%) andthe firm pays 80% (1.40 / 1.75) of its earnings as dividends.
Forward P/E ratio =0.80 / (0.1289 - 0.0600) = 11.61
Where r = requiredrate of return on equity, gn = growth rate in dividends (forever).
4. A preferredstock’s dividend is $5 and the firm’s bonds currently yield 6.25%. Thepreferred shares are priced to yield 75 basis points below the bond yield. Theprice of the preferred is closest to:
金程cfa解析：Preferred stock yield(Kp) = bond yield – 0.75% = 6.25% ? 0.75% = 5.5%
Value = dividend / Kp= $5 / 0.055 = $90.91.
5. A firm is mostlikely to have pricing power if:
A)costs to exit theindustry are high.
B)its product isdifferentiated.
C)its market share ishigh.
金程cfa解析：Firms offeringproducts that are differentiated in terms of quality and features are morelikely to have pricing power than firms that produce undifferentiated(commodity-like) products. High market share does not necessarily imply pricingpower; for example, if four firms each have 25% market share, none of them arelikely to have significant pricing power. High exit costs can createovercapacity in an industry and result in a high degree of price competition asfirms try to maintain production volume during a period of reduced demand.