Help-answering-theses-questions

1. Information indicates that a firm will earn a return on common equity above its cost of equity capital in all years in the future, but its shares trade below book value. Those shares must be mispriced. True or false? Explain.
2. A firm cannot maintain an ROCE less than the required return and stay in business indefinitely. True or false? Explain.
3. Comment on the following: “ABC Company is generating negative free cash flow and is likely to do so for the foreseeable future. Anyone willing to pay more than book value needs to have their head examined.”

 

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