chapter8 #215

March 27, 2018 | Author: Khail Gooding | Category: Preferred Stock, Dividend, Yield (Finance), Stocks, Stock Valuation


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12., An asset characterized by cash flows that increase at a constant rate forever is called a: A. , Growing perpetuity. B. , Growing annuity. C. , Common annuity. D. , Perpetuity due. E. , Preferred stock. 13., The stock valuation model that determines the current stock price as the next dividend divided by the (discount rate less the dividend growth rate) is called the: A. , Zero growth model. B. , Dividend growth model. C. , Capital Asset Pricing Model. D. , Earnings capitalization model. E. , Perpetual growth model. 14., A stock's next expected dividend divided by the current stock price is the: A. , Current yield. B. , Total yield. C. , Dividend yield. D. , Capital gains yield. E. , Earnings yield. 15., The rate at which the stock price is expected to appreciate (or depreciate) is the: A. , Current yield. B. , Total yield. C. , Dividend yield. D. , Capital gains yield. E. , Earnings yield. 16., Equity without priority for dividends or in the event of bankruptcy is called: A. , Dual class stock. B. , Cumulative stock.C. , Deferred stock. D. , Preferred stock. E. , Common stock. 17., The term __________ is usually applied to stock that has no special preference either in paying dividends or in bankruptcy. A. , preferred stock B. , debenture C. , common stock D. , cumulative voting E. , proxy 18., "Preemptive rights" refers to: A. , The right of shareholders to share proportionately in dividends paid. C. , The right of shareholders to share proportionately in liquidated assets. E. , The right to redeem shares. B. , The right of shareholders to share proportionately in any new stock issues sold. D. , The right of shareholders to vote at annual shareholder meetings. 19., Payments made by a corporation to its shareholders, in the form of either cash, stock, or payments in kind, are called: A. , Retained earnings. B. , Net income. C. , Dividends. D. , Redistributions. E. , Infused equity. 20., Equity with differential voting rights and/or dividend payment claims is called: A. , Dual class stock. B. , Cumulative stock.C. , Deferred stock. D. , Preferred stock. E. , Common stock. 21., Equity with priority for dividends and in the event of bankruptcy is called: A. , Dual class stock. B. , Cumulative stock.C. , Deferred stock. D. , Preferred stock. E. , Common stock. 22., The short alphabetic abbreviation for an exchange-listed stock by which the issue is identified in the market is called the stock's _____________. A. , Open name. B. , Trading range. C. , Exchange name. D. , Ticker symbol. E. , Price/earnings description 23., The voting procedure where shareholders may cast all of their votes for one member of the board is: A. , Democratic voting. B. , Cumulative voting. C. , Straight voting. D. , Deferred voting. E. , Proxy voting. 24., The voting procedure where shareholders may cast all of their votes for each member of the board is: A. , Democratic voting. B. , Cumulative voting. C. , Straight voting. D. , Deferred voting. E. , Proxy voting. 25., The voting procedure where shareholders grant authority to another individual to vote their shares is called: A. , Democratic voting. B. , Cumulative voting. C. , Straight voting. D. , Deferred voting. E. , Proxy voting. 26., A stock whose price can be computed by dividing the annual dividend amount by the required rate of return is called a _______ growth stock. A. , Constant. B. , Supernormal. C. , Zero. D. , Capital gains. E. , Dividend. 27., Preferred stock is a type of _______ growth stock. A. , Constant. B. , Zero. C. , Supernormal. D. , Capital gains. E. , Dividend. 28., Given a price at year 5, the dividend in the dividend growth model would be defined as: A. , The last annual dividend paid. B. , The annual dividend in year 1. C. , The quarterly dividend in year 5. E. , The annual dividend in year 6. D. , The quarterly dividend in year 6. 29., The capital gains yield as used in the dividend growth model is defined as: E. , g/P0. A. , D0/P0. B. , D1/P0. C. , g/r. D. , g. 30., The procedure which has the effect of permitting minority participation in voting is called ____ voting. A. , Proxy. B. , Cumulative. C. , Straight. D. , Preferred. E. , Freeze out. 31., A cumulative dividend is defined as a dividend that is: A. , Carried forward as an arrearage if not paid. B. , Payable only if current operations generate sufficient cash in a year to pay the dividend. C. , Paid only to senior holders of common stock. D. , Treated as an interest expense. E. , Paid as an extra payment if the share of stock is called. 32., Which of the following is true of non-voting common stock? A. , It is not legal in Canada to issue common stock without voting rights. C. , Non-voting common stockholders must be paid a dividend each year. E. , Non-voting shares commonly sell at a premium over voting shares. B. , A "coattail" provision requires that 2/3 of all common stock carry voting rights. D. , Non-voting shares must receive dividends no lower than dividends on voting shares. 33., The required return is defined as: A. , The capital gains yield plus the dividend yield. B. , Next year's dividend divided by the current price. C. , The increase in the value of a share of stock over a period of time. D. , The rate at which a stock increases in value. E. , The payment by a corporation to shareholders in the form of cash or stock. 34., A grant of authority by a shareholder allowing for another individual to vote his/her shares is a _____________. A. , Preferred stock. B. , Proxy. C. , Specialist. D. , Cumulative voting right. E. , Dual class stock. Given no change in required returns. II. II and III only E. Dual class stock.. . I and II only C. The right to share proportionately in remaining assets from a liquidation.. As a common shareholder in a firm. . E. . the total return on a share of common stock is comprised of a ________________. . . A. Capital gains growth rate and a dividend growth rate. C. D. C. B. the most appropriate is the _______________. Use the growth dividend model. C. 49. Dividend yield and a capital gains yield. The price five years from now. the price of a stock whose dividend is constant will: A. . B.35. . I. I and III only D. Remain unchanged. I and III only D. I. Which of the following is (are) true? I. III. . and III 44. . This is an example of a company paying a: A. at some point in time. III. You are attempting to value the shares of a new. Non-constant growth. . B. . An increase in the required return on a stock will decrease its market value. You would MOST likely: A. II.. I only B. . A. and III 41. the dividend growth rate exceeds the stock's required return. III. The total return on a share of stock = dividend yield + capital gains yield. . I and III only E. Future cash flows on stocks are not known in advance. . I. Use the non-constant growth dividend model. D. . B. Right to claim proportionate remaining assets from a liquidation. . Increase over time at a rate of r%. and III . Not be able to value this company. Common stock. II and III only E. . Preferred stock model.. E. . . . . Which of the following is true about the differences between debt and common stock? A. The dividend on the firm's stock has not changed in the last five years. Right to vote by proxy. I and III only D. . . its dividend growth rate.. . . 38. .. E. I only B. B. II. when issued. II. 45. B. Which of the following is/are true about common stock dividends? I. . . . and III 40. D. E. Common stocks don't have a maturity date. A. .. . . which of the following allows you to share proportionately in any new stock sold? A. . . Dividend yield and the present dividend. B. D. Dividend that grows at a decreasing rate. 47. If you are told Stable's most recent dividend paid. B. A. III. I and II only D. D0 × (1 + g)/(r . II. . . . .. Over the past four years. Perpetuity model. Which of the following common shareholder rights kicks in when a merger is proposed? A. Preemptive right. . Dividend that grows at a constant rate. Cumulative dividend stock. high-technology firm in a developing industry. .. C. all else the same. I and II only D. . D. Of the stock valuation models studied. Dividend payout ratio and a required rate of return. Which of the following is NOT usually a right of a common stockholder? A. . respectively. .. D. 42. The right to vote on shareholder matters of great importance. but this growth is expected to slow to an equilibrium growth rate in about five years. . 39. Dividend that grows by a decreasing amount. . C. C. Supernormal growth. I. and III 36. You just voted against a merger proposal made by another corporation. II. Supernormal growth model. and a discount rate. Dividends that have been declared but are not yet paid are liabilities of the corporation. Common stock valuation is sensitive to estimates of the dividend growth rate.30. the most appropriate stock valuation model would be the ___________ model. . Preemptive right. D. . . II only C. . I only B. all else the same. C. . I only B. Preference over preferred shareholders in the payment of dividends. . E. . D. 50. Decrease over time at a rate of r%. Bond pricing. E. .g) A. Find the value by valuing the stock as a perpetuity. Assume the anticipated growth rate in dividends is constant for Fly-By-Nite Airlines. . E. When the constant dividend growth model holds. III. A. I. I. I only B. . II and III only E. . you can calculate ____________. D. This pattern is expected to continue into the future.. P0 × (1 + g)4 III. The dividend that is expected to be paid 10 years from now. Which of the following is (are) true? I. 51. Growing perpetuity. 37. B. . . A. . Debt is ownership in a firm but equity is not.. and $1. You must own: A. Cumulative voting. I. and III 46. Bondholders can also own equity. . E. . The dividend yield on a stock is the annual dividend divided by the par value. g = capital gains yield. . 43. . Dividend that grows by 10% each year. . . E. .10. II. a company has paid dividends of $1. D5/(r .00. II and III only D. III only C. Straight voting. You are considering investing in a firm and wish to place a value on the common stock. . when paid.. Right to receive proportionate dividends. E. The right to share proportionately in dividends paid. Decrease over time at a rate equal to the dividend growth rate. . C.. Dividends received by both individuals and corporations are fully taxable. Debentures. D. are expected to grow at a constant rate forever. $1. Preferred stock. I and II only C. Increase over time at a rate equal to the dividend growth rate. II. II. E. C. Creditors have voting power while stockholders do not. but not vice versa. D. Proxy voting.20. . B.. III only C. Use the zero growth dividend model. The price today. I and III only E. A decrease in the dividend growth rate will increase a stock's market value. Which of the following is a legitimate reason the valuation of common stock is generally harder than the valuation of bonds? I. Absent any information suggesting future changes in the dividend rate. Payment of dividends is a tax deductible business expense for a corporation. II only C. Preferred stock dividend. . . Perpetual growth model. Periodic payments made to either class of security are tax deductible for the issuer. II. .. . Class B stock. . . B. . . . As illustrated using the dividend growth model. . . C.. The right to vote for directors. The expected value of the firm's stock at the end of four years (P 4) is: I. Zero growth. 48. . Interest payments are promised while dividend payments are not. A. .g) II. . The dividend growth model only holds if. . II and III only E. II only B. Dividends on the common stock of Stable Inc. Capital gains yield and a dividend growth rate. Right of first refusal to buy new preferred stock. II. . A. Constant growth model. You are attempting to value a stock in an industry where firms are generating exceptional dividend growth. C. $1. D. A. E. C. If two stocks have the same earnings per share and required rate of return.g)n 68. . The required market rate of return on a stock is known in advance.. Which of the following is NEVER a right of an owner of a share of preferred stock? I. E. The current value of the stock will decrease. . . 67. You wish to be on the board of directors of a company. . . A share of preferred stock represents an ownership interest in a corporation. The dividends are a tax-deductible expense. $0. C. 69. Common dividends are paid even though preferred dividends are in arrears. D. Capital gains rate.. Which of the following does NOT correctly complete this sentence: Preferred stock is much like debt in that ______________. C. The future cash flows of a stock are known. . differences in the ____________ of the two companies can account for different stock prices. B. . Paying for acquisitions. C. . B. . . . C. . B. . A preemptive right E. It is more difficult to value a stock than it is to value a bond because: A. . A. . current. . The growth rate must also increase. Dividend yield. The payment of dividends by the corporation is not a tax-deductible business expense. . . P0 = D1/(r . P0 = D1/(1 + r)n + g D. D. A. Cumulative voting. . + Dn/(1 + r)n + Pn/(1 + r)n B. paid today.. E. 66. Is valued using the preferred stock valuation technique. B. P0 = D/r C. II. . B. Has dividends that grow at a high rate for the life of the stock. . . The right to share proportionately in preferred dividends paid. . A. Which of the following is NOT a right of an owner of a share of common stock? A. ____________ can freeze out minority shareholders. D. . If you wish to buy as low a percentage of the total outstanding shares as is necessary to guarantee yourself a seat on the board.. .. E. C. E. Number of shares traded (volume).. Voting rights. Number of directors. 60. just paid. . . 64. P0 will increase. recent. . . 65. . B. . Value of preferred stock. then: A. The maturity value of a stock is known. Both receive a stated payment from the corporation during the year D. A corporation can be sued for not paying undeclared dividends. The dividend amount must also increase. . A. . . Control of the firm. E. Has high growth dividends only for a limited number of years. . Stock dividends are a legally-binding liability of the corporation. A share of preferred stock is generally easier to value than a share of common stock. Dividends paid to shareholders represent a return on the capital directly or indirectly contributed to the corporation by shareholders. III. Common shareholders are able to vote by proxy even when they are unable to attend a shareholders' meeting in person. . . . Common stockholders are able to place members on the board of directors to represent their interests in opposition to the board candidates backed by preferred shareholders. B. Next. II and III only E. . . . Paid today.. C. E. B. Cumulative dividends. . . Expected. expected. 62. D. . Just paid. .. . .52. Dividends in the future are expected to grow at a constant rate of 3. . The right to share proportionately in dividends paid. . recent. Multiple classes of stock. . . Growth opportunities. The primary reason for creating dual or multiple classes of stock has to do with: A. . B. . Exchange listing requirements. . $1. . B. Debt is repaid before preferred shareholders are paid anything in a liquidation. . 61.. The right to share proportionately in remaining assets from a liquidation. . recent. E. The holders of both get a stated payment in the event of a liquidation 57. Cumulative preferred stock. C. D.. . Closing price. . 63. Preferred stockholders are paid before common shareholders in a liquidation. . E. P0 = D1/(r . C. . Which of the following items does NOT usually appear in a National Post common stock quote? A. I only B. B. Arrearage. Both frequently carry credit ratings B. D. Both payments are subject to the same tax treatment for the issuing firm E. . Number of shares outstanding. D. Which of the following typically applies to preferred stock but NOT to common stock? A... Dividend yield.. . Unequal voting rights D. E. The supernormal model must be used to value the stock. . . B.. . past. Dividend yield. . A. . . Which one of the following formulas should be used to compute the value of the stock today? A. . you should look for a firm that has ____________.. Cumulative voting common stock. . Which of the following would be considered a violation of the rights of one or more classes of a firm's stakeholders? A.g) E. A supernormal growth stock generally: A. Preference over preferred shareholders in the payment of dividends. The ABC Co. The payment of dividends is at the discretion of the board of directors.20. The price of a stock is greater than the present value of all future dividends. D. E. Preferred stock is more like common stock than it is like a bond. 53. . and $1. D1 in the dividend growth model is associated with which of the following words when solving for P0? A. .30. . C. D. Preferred stock dividends often represent a tax-advantaged investment for some corporations. Last. .45 over the past four years. . . The right to vote for directors. E. Cumulative voting Class B stock. 58. . P0 = D1/(1 + r)1 + D2/(1 + r)2 . future.. . . . Convertible debentures. C. Is associated with a company that is experiencing rapid contraction. I and II only D. Which of the following is a true statement regarding publicly traded stocks and bonds? A. Tends to increase its dividends per share by 30% or more for an extended number of years. 54. . . has paid annual dividends of $0.. . Straight voting common stock. Satisfying TSX bylaws. D. C. Proxy. Freezing out minority shareholders.. The right to vote for directors. . B. The right to share proportionately in remaining assets from a liquidation. . D. Cumulative voting power 55. Par value. Proxy voting.. Both can be repaid using a sinking fund C. . D. A lower priority in liquidation B. I and III only 56. E. B. The right to vote on stockholder matters of great importance.. Straight voting.5%. The life of an equity security is limited. Which of the following statements about dividends is false? A. . D. B. The right to cumulative dividends C. 59. Cumulative voting. . a firm creates a second class of stock that has ___________ as compared with the first class. E. .64. III only C. . C. 70. C. It is legally considered equity. expected. E. Cumulative dividends. Which of the following terms is typically associated with BOTH preferred stock and common stock? A. . . C. D. . Often. . Voting rights. If the required rate of return used in the dividend growth model is increased. High and low price for the trading day. .. Equity securities have no maturity date. Increase the dividend yield as well as the capital gains yield. Which of the following statements is (are) correct concerning preferred stock? I.90 B. Selection of all senior management executives III. IV.. . .65 C. E. . . . II. E. . If you require a 10% return on your investment.0% B. III. II. . D. What is the value of one share of stock? A. II. The stockholders determine the amount of dividend to be paid. Right to convert their shares into bonds with an equivalent yield-to-maturity. You can sell the stock for $75 in three years.00 in three years. III. $115 E. $100 C. E. . 13. . Preferred shares carry voting rights while common shares do not. II and IV only C.. The dividend amount used in the formula is the last dividend paid. 76. D. Which of the following rights are granted to shareholders of common stock? I. A missed dividend payment never has to be paid if the preferred stock is cumulative. . 82.66 E. . C. . 80.. What is the required rate of return? A. . Which one of the following statements is correct concerning the differences between preferred and common stock? A. The valuation is as of the year following the payment of the dividend used in the computation. . . $2. . your required return on equity investments is 12%. Decrease the growth rate of the corporation and increase the current yield. If the management of a corporation wants to raise equity capital while maintaining control over the corporation and limiting their cash outflows. $59. Increase the dividend yield and decrease the current yield. III only B. . . $64. The right to share in any remaining assets in a liquidation A. . The number of open seats. I and II only D. Obligation to convert their shares into shares of common stock. B. 77.33 D. Non-voting preferred stock. . Common shareholders A. Election of corporate directors II. Dividends are a tax deductible expense. C. Subsequent dividends will remain at $2. E. Preferred stock has a stated liquidation value. Convertible preferred shareholders III. III. There are three seats open on the board of directors of ABC. . 11. C. . and IV only 72. The dividend growth model assumes that: A. . .. $71. A. Is equal to the dividend amount divided by the current market price of the stock. 11. II and IV only C. .. . Preferred shares are not convertible.. Returns on the stock of firms like NoGro are currently running 15%. 12. B. . I and III only B. Non-voting common stock. . . Voting preferred stock. I. Voting common stock.. The rate of growth exceeds the required rate of return. $31. Type: Problems 86. IV. II only C. Cumulative voting is used. . E. . D. Ann owns voting shares of ABC common stock. . Is the same as the current yield for shares of common stock. .71. Zero coupon bonds. Common stock dividends can be either cumulative or non-cumulative. $64. The number of shares owned. how much would you be willing to pay for a share of this stock today? A. the maximum number of shares that Ann can vote for any one position is equal to: A. $120 84. D. Common shareholders have first right of priority after creditors in liquidation. . Common shareholders generally have more control over a corporation than preferred shareholders. III and IV only D. . and IV only 81. $39. . D. B. The rate of growth is constant. II. . . C. . Three times the number of shares owned multiplied by the number of open seats. I. Right to convert their shares into cash at par value at their discretion. . . II.5% E. The number of seats open times the number of shares owned. . B. Given constant earnings per share. Dividends become a liability of the corporation at the time they are declared. I and III only 73. $95 B. III. D. II. Preferred stock is never callable. . . and $5. Shareholders receive a consistently high rate of return. $19. Have no effect on either the capital gains yield or the total return. .0% F.5% C. II. Preferred shareholders II. . Management controls most of the common shares outstanding. . . E. . . If ABC uses cumulative voting. C. Next year's dividend is the same amount as last year's dividend. . Inc. II. they should issue shares of: A. . . C. . .. $3. and IV only E. . II and IV only E.50 in two years. Non-voting common shareholders IV. . and III only D. . $65. The dividend on Simple Motors common stock will be $2 in one year.30 85. . The capital gain yield: A. B. .90 indefinitely. . . an increase in dividends will generally: A. 79. . C.. D. III. and the stock is expected to be worth $110 one year from now? A. has just issued a dividend of $2.50 forever currently sells for $21. B. Which of the following types of shareholders will benefit from the increased profits that will be generated from this find? I. Which of the following statements concerning dividends is (are) correct? I. . D.0% D.65 C.. . The option of voting by proxy IV. Have no effect on either the total return or the current yield.82 D. Deep Pockets Mining unexpectedly discovered an extremely rich vein of gold. Suppose NoGro. . Inc. Voting by proxy is not permitted. Common stock is a form of equity while preferred stock is a form of debt from a legal standpoint. I only B. B. .25 E. Must always be a positive value. . B. A. . .90 per share. .. and IV only E. Is the rate at which the price of the stock grows. E.. I and IV only D. A stock that pays a constant dividend of $2. 78. C. What would you pay for a share of ABC Corporation stock today if the next dividend will be $2 per share. 75. I. and III only 83. IV only B.69 B. III.. 12. . Shareholders of convertible preferred stock generally have the: A. Obligation to convert their shares into callable shares of common stock. . $110 D. ... . $13. . Right to convert their shares into shares of common stock. One-third of the number of shares owned. . 74. . I. IV only C.. All preferred stock has an obligatory sinking fund. . Common dividends in arrearage must be paid prior to any additional preferred stock dividends. and IV E. E. . When subtracted from the dividend yield is equal to the required rate of return. . I.70 . It is easier for an outsider to gain control over a corporation when: A. 0% B.3% D. The price will likely rise by less than 100%. The price will likely rise by the present value of $1. 11. $26. .75 per share. The most recent dividend was $1. $27.. 10. what the stock should sell for today? A. $2. Given a current market price of $55. 8. 11.99 C.40 92. . . Given a required return of 12%. .00% E. $149. currently pays a $1 annual dividend.01 .50 dividend in one year if the expected dividend growth rate is 3% and you require a 16% return on your investment? A. The dividend will increase at a 6% rate annually thereafter. what will the dividend be two years from now? A. $1. E. .50 per share rather than the originally expected $1. the price of the stock in two years will be: A.76 88. . What would you pay today for a stock that is expected to make a $1. .. higher B. $19. As its target customers age and pass on. The price will remain unchanged.21. . .95 94. . $16. .21 B. 10% annually for the two years after that. 10. . 9. A.. Suppose the Pale Hose Corp.50 C. manufactures "no-inhale" cigarettes. $1.2% 96.45 104. $29.50 C. . but the firm will begin paying dividends in three years. What is this firm's dividend growth rate assuming the constant dividend growth model is appropriate? A. 7% E. . . 6% D. ABC Company's preferred stock is selling for $25 a share.. . Biogenetics. . 7% B.6% E. $14. . .75 C. Inc. Biogenetics. $2.. $15. . $7. sales of the product are expected to decline. 5% C.47 B. what would you pay for the stock today? A. . . The dividend will not subsequently change. $13. . . . demographics suggest that earnings and dividends will decline at a rate of 4% annually forever. $12. $15. If the required return is 12%. . $25.44 C. Boomer Products. McIntyre's Moats. If the required return is 14%. From then on. plans to retain and reinvest all of its earnings for the next 30 years. . demographics suggest that earnings and dividends will decline at a rate of 4% annually forever. the firm will begin to pay a $12 per share dividend. what is the required return on the stock? A. sales of the product are expected to decline. $25. Assume the required return is 10%. . . The firm just paid a dividend of $2. The expected dividend one year from now is $1. 8% 101.98 C. . therefore. . . Energistics.21 B. lower E. 12. .14 E.1%.00 E. .80 D.29 D.40 per share. $133.0% B. 9.56 C.54 B..39 E. 99.. .76 105.15 D.. .49 B. .15 C. $14. . .50 100.15 D. Given a required return of 15%. $7. Dividend growth is expected to match sales growth.51.50 and dividends are expected to grow at a rate of 5% indefinitely.25 B. What must your required return be on the stock? A. $12. . Beginning in year 4.78 91. The stock of MTY Golf World currently sells for $133.50 and the required return is 10%. $11. As its target customers age and pass on. $12.92 D. What is the required rate of return on ABC stock? A. The price will likely rise by exactly 50%. it is expected that dividends will resume their historical constant growth rate of 5% per year.. . . Thus. . . . . . $12. The first dividend will be $1 and dividends are expected to grow at 5% thereafter. . higher D. manufactures "no-inhale" cigarettes. A.01 D. $10. $10. B. 9. The price will likely double. Inc. $8. $3. . 9% D.43 D. Beginning in year 31. . $11.80 E. . . $3. Inc.09 D. You believe the stock will sell for $12 in one year.11 D.77 B. .00% C. $143.00E.. . announces that the dividend for the next year will be $2.. . .00 D.27 E. 4% B. $18. If the required rate of return is 12%.00 B. . given a required return is 12%. . What is the current market price of the stock? A.06 B. higher 89. $17. .52 C. . Thus. . is expected to pay a dividend next year of $1. . $80. given a required return of 12%. C. and is expected to pay a dividend of $1.1% C. You must. Inc.. The first dividend will be $2.33 C.25 C.50 per share. The preferred stock of the Pearson Institute pays a constant annual dividend of $3 and sells for $21. lower C. $15. Suppose that you have just purchased a share of stock for $22. .07 one year from now. has just paid a dividend of $1. 10.98 E. it just paid a dividend of $1. . plans to retain and reinvest all of its earnings for the next 30 years. Beginning in year 31. .30 E. Its dividend is expected to grow by the same amount.. McIver's Meals. The firm has a constant dividend growth rate of 7% and just paid a dividend of $6. 9. . 10.49 E. $14. Given a required return of 15%. .65 102. $9. ABC Corporation's common stock dividend yield is 2. what should the stock sell for today? A. Inc. what will the stock sell for one year from now? A. .82 D.3% D. Llano's stock is currently selling for $51. and 5% annually thereafter. Dividends are expected to grow at 7% indefinitely and the most recent dividend was $1. .62.25 E. . The current price of XYZ stock is $51. believe that the required return on the stock will be ____ % ___________ in one year. Boomer Products. . 5.87. . Inc. . $42. D. A.00% B.50 and dividends are expected to grow at 2% thereafter. the stock should today should sell for: A. 9.45 B. 9. what is the value of a share of Pale Hose? A. . $14. $29. McGonigal's Meats. $4.00 103. $13. The firm plans to begin paying dividends in three years. . $32. . 13. $2.64 C.. . Killnum Corp. $152.75 per share.2% 97. $28.18 B. $2. What is the required rate of return on XYZ stock? A. . $127. 8% C.. the firm will begin to pay a $12 per share dividend. If the required return is 10%. . . 10% E.00 E. the stock should sell for _____ today.00 D. Inc. . plans to retain and reinvest all of its earnings for the next three years. . . Given a required return of 15%.50 93.13 E. currently pays no dividends. Suppose Pale Hose. $3. currently pays no dividends.67% 98. $16. $22. 8.39 B. Sales and profits for Pale Hose are expected to grow at a rate of 5% per year. 10. .6% E. .1% C. $13. .. Inc. What would you expect to happen to the price of the stock? Ignore any tax effects. Both sales and profits for Pale Hose are expected to grow at a rate of 15% for the following two years and then at 2% per year thereafter indefinitely. . ..30 90.25% D. $13. 9. . what is the value of a share of Pale Hose? A. . $8. The firm just paid a dividend of $2. $10. . 11% 95. at the end of year 3 the firm will pay a special dividend of $5 per share.. the firm will begin to pay a dividend of $1 per share. $11.50. $1. . $21. Inc. 7.50. Dividends are expected to grow at a constant rate indefinitely. Investors believe that dividends will grow at 15% next year.. . . which is expected to grow at a 3% rate annually forever. . $16. . A. 50. $1. .38 B.000 C.4% E. 125.5% B. $29.76 .5% B.000 E. Alberta Copper has a new project that will generate net cash flows of $40. If it has the following expected dividend growth rates what should the stock sell for? A. There are a total of 420 shares outstanding. . $9.89 E. 2. 750 E. . What constant growth rate is expected beginning in year 3? A.79 D. If the current dividend is $3 and the required return is 16%. . 0 B.000 shares outstanding. . Big Hat must have closed at _________ per share on the previous trading day. $22. If the required return is 16%. At the end of year 5. Then the constant growth model suggests that the required return on Big Hat stock is: A. Based on the quote. .000 D. A firm's stock has a required return of 10%. $0. The stock price of Saskatchewan Steel should be _______ greater than the stock price of Alberta Steel.45 B.8% 122. Supernormal growth of 5% is expected for the next two years. 5. CBC stock is expected to sell for $22 two years from now. 100. $2. . 2.40 121. 9.5% C. 250. $25. 91 E. . $3. $0. . . . . $6. Ltd. $29. . .092 C.30 C. Suppose that sales and profits of Oly Enterprises are growing at a rate of 30% per year.9% C.25.500 E.17 D. Etling Inc. $4. . $98.13 E. . . 9. you can cast as many as _____________ votes for a single director.29 C. 209 B.000 E. $3. . $25. A. Your firm is converting from cumulative voting to straight voting. $7. . how many shares do you need to control to assure yourself a seat on the board under cumulative voting procedures? A. Inc. . $98.000 per year forever. a good estimate of EPS over the last four quarters is: A. 1.26 C. 25. . If Russian Motors closed at $22 and the current quarterly dividend is $1.001 D. The current dividend is $1 and the required return is 15%.001 B. 40. Moore Money Inc. . . . .0% D. what is the price of the stock? A. .7% C.4% E.925D. .00 B. . .. 22. Four directors will be elected and you wish to be one of them. what is the value of a share of stock? Assume dividends grow at the same rate as earnings after year 4. $2. The stock's dividend yield is 6%. what% yield would be reported in The National Post? A. . 0 B. .58 E.0% D.000 and rates of return of 10%. . For the current year. A firm has 200. how many more shares must you buy to be assured of earning a seat on the board? A.7% 111. The required return on the stock is 15%. . the number of Big Hat shares that changed hands was: A. .1% D. $1. $26. 100 B. The stock's dividend yield is 6%.. Saskatchewan Steel. .000 per year forever..80 D. .. .. . . 8.5% 110. 8.87 E. . $2.18 B. At the end of four years the growth rate will drop to a steady 4%. .001.000 118. .7% C.. just paid a dividend of $1. $2. . .10 B.50 120. $2. . . . the expected dividend per share is: A. 119. . 30. 9.68 107. $98. . 33.001 .000 shares outstanding and that three directors go up for election at a time. 21 D.. 209. . A..10 E.668 E. . . .4% B. $8. $3. 7. 250. . .60 112. . Oly will issue its first dividend in the amount of $2 per share. $27. . $100. There is an election being held to fill two seats on the board of directors of a firm in which you hold stock. . 7.. 6.49 B..31 C. . .17 C. 8. A firm's stock has a required return of 10%. You currently own the minimum number of shares needed to assure yourself a seat on the board in any election under cumulative voting.. . . $3.88 D. 66. .40 C. $28. 250 C. . 6. On this trading day. What dividend did the firm just pay if the current stock price is $40? A. 500 D.32 D.'s dividend is expected to grow at 6% for the next two years and then at 3% forever.13 D. With cumulative voting.15 D. Two directors are to be elected.1% D. ..91 108. $1... and Alberta Copper.82 C. . Since the firm uses cumulative voting.60 D. . . . Suppose you own 500 shares of Biogen common stock.60 113. A. .. 6.50 D. . $2. A. . . . . 12.45 123.7% B.. 141 115. If three directors will be elected. . both recently announced earnings of $400. .001 C.. . Assume the expected growth rate in dividends is 7%.001 117. .67 C. .20 E. $27. $8. If the election is conducted under cumulative voting and you own 120 shares.20 E..04 B. . 25. $3. . . . 20 C. 16. 20. .106.250 E. 9. . $2. Both companies have common shares outstanding of 250. . .0% E. 8. $0.16 B. What is the dividend the firm is expected to pay in one year if the current stock price is $40? A.3% 116. $10. How many more shares must you purchase in order to assure yourself a seat under straight voting? Assume there are a total of 500.000 114. Saskatchewan Steel has a new project that will generate net cash flows of $50. $97.40 C. $2. $26. $99.2% E. what percentage of the shares (plus one) do you need to have on your side to guarantee you a seat? A. $9. $7. 22.45 109. . 20.10 B.092. $15. . $27.94% B. $17. 5.40 B.36 E. undervalued.24% D.78 D.29 D.. . $17. .35 B. . . $12. What is the dividend growth rate based on this quote? A.68 D.73% . 25% E. The KLS Co.10. $17. $87. $16. $21. What rate of return will she earn? A.71 D. 124. . $14. . What is the rate of return on Swanson stock? A. $14. The price of Bradley Broadcasting stock today should be: A. 6. 1. How much is one share of Noshima Industries stock worth today if you require a 9% rate of return? A. MIKO stock is priced at $21. $114. . The par value of the preferred stock is $100. . 713.80%. 16. It also stated that dividends are expected to increase by 40% a year for each of the following four years and then increase by 4% annually thereafter.. $18. Swanson Brothers expects to pay a $2. $1. and $1.51% 130. Assume that Big Hat paid a $1. Fairly priced D.. . . what rate should it assign to the new shares? A. Shares of Blue Dye. 50% 129. $1. . 4. .87 C. Morris. $14. . $0. How much would you be willing to pay for one share of Johnson Company stock if the dividend remains constant and you require a 9% rate of return? A.25% over the prior year. $20. . .80 per share. . Noshima Industries issued dividends totaling $0. .11 C. 16. is expecting to pay $1. . What is the expected price per share of MDK stock six years from now? A.74 C.56 E.90 B.81 142..00. 5. . . How much would you be willing to pay for one share of the Brown Company stock if you require a 12% rate of return? A. After that.331 in one.05 D. . . The annual dividends of Blue Dye have been increasing at a rate of 2.46 128. . .. If Michael's wishes to sell some new preferred stock at par.21.60 last year. . What is growth rate of the Bradley Broadcasting dividend during year 2? A.15% D. Cannot tell without more information 126. 15% C.35 D. 24. $13.32 per share.77% D.64 a share and produce a total return of 14. $125. $18.14 141. . After next year. .. $17. .7% Bradley Broadcasting expects to pay dividends of $1.00% E. .21 E. The MIKO Corp. . After that.66% 137. 4.. Undervalued C. . 10% B.31 D. . . $13. $15. 14% 131. Michael's Inc.42% C. How much is Bradley's stock price expected to increase during the first year? A. Andy is in the 25% marginal tax bracket and wants to earn 6% after-tax on his investments. . Overvalued B. Assume that Big Hat is selling at its equilibrium price. . $23. .99. . .14 140. .. 10% E. .50. $22.36 B.05% B.96% C. .04 C.59 D. $17. $1.02% 136. paid $0. 6. $27. .7% E. . What is the rate of return on MIKO stock? A. .93 138..20 dividend next year which is an increase of 3. . .94% E.. .30. Alhandro..41 D. it projects that dividends will increase by 1. 14. 8.91 C. $19. 9.68 next year and that future dividends will be increased by 2. .34.24% C. . $9. 20% D. .5%. $2. How much is Andy willing to pay today for one share of Mahenterin Inc.. 16. is a high growth firm that has never paid a dividend.37 B.60. $29. 11.20 134. .14 139..91 133. Stocks of similar risk yield 10%. .239 for 100 shares of 6% preferred stock. are currently priced at $23. 16.01% B.5% annually. MDK.30 E. or fairly priced? A. $9. .15% D. . . You believe that the required return on Big Hat stock is 12% and that the expected dividend growth rate is 10%. 12. Is the stock currently overvalued.33 C.48 B. . .42 C.33 D. What is the expected amount of the next dividend? A. Inc.69 B.19% 143. . respectively. Currently. It has been increasing its dividends by 4% annually and is expected to continue doing so. . How much can it expect to receive for each new share of stock offered if investors require an 11% rate of return? A.. dividends are projected to grow at a steady rate of 2. two.12 C. 14.12 annual dividend in the previous period. . $1.4% and are expected to continue at this rate.5%. respectively..1% D. . Inc.87 E. . has some 8% preferred stock outstanding. $19..86% D. 4. $16. 6.28% C. . stock? A. Inc.13 E. 26.. . $15. .84 E. $14.29% 125.59% C. What is one share of KLS worth today? A.20% C. The Brown Company just announced that it will be increasing its annual dividend to $1. 23. . dividends are expected to grow at a constant rate of 4% forever. . . which is expected to remain constant for the foreseeable future. $14. is expected to pay the following annual dividends for the next three years: $1. $2. 17. it expects dividends to increase by 50% annually and then remain constant thereafter.07% E. $98.5% annually. Jamie just paid $8. . The Johnson Company just paid an annual dividend of $1. . 5. 9% D. just paid an annual dividend of $1. 9% preferred stock is currently priced at $124. and $1. and three years.23. . Shares of Swanson stock are currently selling at $15. . Also assume that dividends are expected to grow at a constant rate of 25% for the foreseeable future. $15.5% B. .12 B.45 B. The company just issued a press release stating that next year it plans on paying an annual dividend of $0. . 7.13 in annual dividends for the next three years respectively. For the next two years. 4% C. . After that time. .76% B.60. . Mahenterin Inc. . $12. 3% B. 24.81 135. What is the required return on the stock? A. . $123. $9.. . $22. . it is expected to increase its dividends by 3% annually.63 C. $2. . It has just announced that it expects to increase its dividends by 2% each year for the foreseeable future. 7. 1. The required rate of return on this stock is 15%.50 B. Stocks similar to KLS are yielding 9. Inc.87 E. $14. and $1.17% E. .84 in dividends last year.16% B. $17.. 127.24% E. . . $19.7% C. . . . 10. .94% E. . . What is expected capital gains yield on Bradley Broadcasting stock during year 8? A. $9.27% B. 6. $18.05% D. . .. 4. 18. .77 C.00 E. 22.38 132. . How much are you willing to pay for one share of Morris preferred stock if you require a 7% rate of return? A. 8.30 E.. .03. . . earnings yield. preferred E. . 251 C. . . market price. $0. Thus.33% 148..21% C. A. . 156. A form of equity which receives preferential treatment in the payment of dividends is called _____ stock.94% 147. The price today was down $2.48 annual dividend which has remained constant for five years.00 and plans on increasing its dividend by 3% annually. while Teri owns 300 shares and Lucie owns 500 shares. . . How many additional shares of stock must Jason buy to ensure that he wins a seat? A. E. 8% D. 116 D. . 376 153. one share of James River Co. 164. rate of capital gain. Given this. 3. . perpetuity due. how many additional shares will Marcy have to buy from Teri or Lucie to guarantee that she will be elected to the board? A. . D. $0. also remain constant. total C. Given this. . has a market value of $15. . how many additional shares will Marcy have to buy from Terri or Lucie to guarantee that she will be elected to the board? A. dividend yield C. There are three positions open on the board of directors. C. . D. .85% E. Leon's required rate of return is 13% on this type of investment. debenture C. A.8% C.15% B.31% E.10. The stock closed today at par. . 7. cumulative C. 256 E.. . . . . The stock valuation model that determines the current stock price by dividing the next annual dividend amount by the excess of the discount rate less the dividend growth rate is called the _____ model. 8.50% C. $0. An 8% preferred stock closed yesterday at a price of $91. .52 145. is valued as if the dividend paid is a perpetuity. . 1 C. . A form of equity which receives no preferential treatment in either the payment of dividends or in bankruptcy distributions is called _____ stock.. The newspaper shows a P/E of 23 and a dividend of $1. 626 C.9% D. growing perpetuity. . . $0.. There are currently three seats open on the board of directors. zero growth B. stock and has an expected return of 8% on this investment.67 a share. current B. 30% are owned by Peter. . 0 B. Margaret paid a price of $15. cumulative C. The daily newspaper lists this information on a stock: Last $36. 151 D. . . . 16% 155.06% D. is valued with an assumed growth rate of 3%. . 16. Marcy owns 100 shares of Dee's Inc. Next year's annual dividend divided by the current stock price is called the: A. 7. Net Chg -1. 298 D. stock: A. dual class B. . A. deferred E. pays a constant annual dividend.41% B. 4. . . 63 C. . E. . decrease when the market rate of return increases.80% 149.. Jason wants to be positive that he can be elected to one of these positions. total return E. What is the current dividend yield? A. .144.. There are currently three seats open on the board of directors.45 C. 3.. E.. $0. . .32. capital pricing D.. 1. There are 5 seats open on the board of directors of Alpha. 4. . .2% E. 30% are owned by Peter. 411 151. Inc. the market price of Kenwith stock will: A. 10% are owned by Jeff. . . 9. . . The James River Co. Inc. . 56 C.00. A. . B. . C. . total return. preferred stock. ABC. ABC stock closed yesterday at a price of $39. proxy D. Amy wants to be elected to one of those positions. 8. currently pays an annual dividend of $1.50 paid one year from today. market price B. . . discounted dividend 157. Leon purchased 1. . .00 a share for Battery Co.49 E. paid $1. There are 1. 1. ABC pays a $0. There are 900 shares outstanding. . . How many more shares must Amy own to guarantee her election if Jackson Supply uses straight voting as opposed to cumulative voting? A. What is the amount of the current dividend? A.. B. Jason wants to be positive that he can be elected to one of these positions. currently pays an annual dividend of $1. 0 B. decrease over time. .44 B.63 and Yld% 1. .20 in dividends last year.00 and plans on increasing that amount by 5% each year. The rate at which a stock's price is expected to appreciate (or depreciate) is called the _____ yield. . 351 150. .76% E. . common stock E. . total yield. stock.. stock? A. . E. With straight voting. 126 D. . D. C. . . . . increase when the market rate of return increases.. With cumulative voting.. . . . .31% B. . . 7. . . What is the capital gains yield on LJK stock? A. . earnings 159. is basically worthless as it offers no growth potential. What is the growth rate of the Battery Co. Inc. . increase over time. dividend yield . . Twenty% of the shares are owned by Midge. . . 625 B. 0% B. ..39 for shares of ABC. cumulative C. B. . has a market value equal to the present value of $1.6% B. .. pays an annual dividend of $1.47 D. 10% are owned by Jeff. .3. dividend D. earnings capitalization E. preferred stock 161. 1. A. 13. 25% are owned by Jason and the rest are owned by Edward. 1250 154.500 shares of Alpha stock outstanding. growing annuity. . . .3% 146. 251 E. deferred D. rate of capital gain D.500 shares of stock outstanding. dividend growth C.. . dual class B. Inc. 158.72% C. Jackson Supply has 2. 201 E. 0 B. it can be stated with certainty that the _____ of the Koster Co. . . . A. . . . has earnings per share of $1. The Keyser Co. preferred E. 0 B. 3.. There are 1. .. . How many additional shares of stock must Jason buy to ensure that he wins a seat? A. There are 5 seats open on the board of directors of Alpha. Alpha uses straight voting. The Battery Co. . Twenty% of the shares are owned by Midge. C. yield to maturity. stock is greater than the _____ of the Keyser Co. There are 900 shares outstanding. proxy 163. while Teri owns 300 shares and Lucie owns 500 shares. .27% D. . 8.80 a share. 1. common annuity. . deferred D. 351 152. An asset characterized by cash flows that increase at a constant rate forever is called a: D.44. 165. The stock paid a dividend last year of $1.80 per share. What is the current dividend yield today? A.00% D. 376 E. capital gains yield. . A. . dividend yield. dividend yield. common 162. . A _____ is a form of equity security that has a stated liquidating value. bond B. Alpha uses cumulative voting. . The voting procedure where you must own 50% plus one of the outstanding shares of stock to guarantee that you will win a seat on the board of directors is called _____ voting.. democratic B. straight D. stock..19.500 shares of Alpha stock outstanding.50 per share on its common stock. .. This dividend amount has been constant for the past 15 years and is expected to remain constant. 1. 4% C.. The Koster Co. common 160. 8. Marcy owns 100 shares of Dee's Inc. . 25% are owned by Jason and the rest are owned by Edward. capital gains.000 shares of LJK stock this morning at a price of $45. 12% E. capital gains E. . What is the dividend yield? A. B. . . . . A. . 834 D. The common stock of the Kenwith Co. all else constant. . D = P0 × (R . . If cumulative voting applies. current yield II. stocks that do not pay dividends to decrease in price while the dividend-paying stocks maintain a constant price.. . . III and IV only 173. respectively. elect the chief operating officer (COO). $0. will control the elections. II. If straight voting applies.. . the company is voting to elect two new directors. 172. has 1. III and IV only 177. . C. increase by 5% D.. . has a total of 100 shares of stock outstanding. arbitrated settlement whereby you are granted control over one of the three open positions.166. . market values of all stocks to remain constant as the dividend growth will offset the increase in the market rate. C. .. I and III only C. $. . you would most likely determine the value of the stock _____ years from today before determining today's value. The Zilo Corp. You do not own enough shares to control the elections but are determined to oust the current leadership. . Jack owns 35 shares of stock in Beta. decrease by 5% C. 7 E. an amount computed as the next annual dividend divided by the required rate of return. . E. . 5 C. . will be able to elect at least one director as long as there are at least three open positions and the shareholder owns at least 25% plus one of the outstanding shares. B. The first step in computing the value of this stock today. I. is owned by a group of shareholders. The price of ABC stock needs to _____ if Fred is to achieve his 10% rate of return. . The total rate of return earned on a stock is comprised of which two of the following? I. Fred Flintlock wants to earn a total of 10% on his investments. supernormal growth. . III and IV only D. . A. II and IV only E. 168. 6 D. regardless of the number of shares owned. . Supernormal growth refers to a firm that increases its dividend by: A. B. ABC Co. . The stock pays a $1 a year dividend.20.25 a share and then increasing that amount by 3% annually thereafter. B. 7. . 6. proxy fight for control of the firm.. an amount computed as the next annual dividend divided by the market rate of return.10 or more per year. and $. C. . interest yield. . yield to maturity III. . . II and III only D. and III only 167. . the same amount as any other stock that pays the same current dividend and has the same required rate of return. 4. . increase by 10% E. C. an amount in excess of $. B. . dividend yield IV. . is only permitted to elect one director. If you expect the market rate of return to increase across the board on all equity securities. . C. . . Presently. The total rate of return on a stock can be positive even when the price of the stock depreciates because of the: A. 174. A. dividend growth rates to increase to offset this change. . 178. 8 170.30 over the next 6 years.. states that the market price of a stock is only affected by the amount of the dividend. who owns more shares than anyone else. .10 a year. 3. . is to compute the value of the stock in year: A. B. Latcher's Inc.000 shareholders and is preparing to elect three new board members. . Each share receives one vote. He recently purchased shares of ABC stock at a price of $20 a share. assumes that dividends increase at a constant rate forever. II. I only B. The Robert Phillips Co. Beta.g) B. E. a shareholder: A. D. and wants to exercise as much control as possible over the company. Jack can control both open seats. Which one of the following correctly defines the dividend growth model? A. C. P0 = D0 (R . After that. total loss of power for you since you are a minority shareholder. D. Jack does not own enough shares to control any of the seats. E. then you should also expect the: A. all else constant. . . increase by 15% 175. is a relatively new firm that is still in a period of rapid development. D. I and II only E. I only B.. . . Inc. B. D. elect the corporate directors. . E. $0. . Jack can control both open seats. IV. .. 179. . capital appreciation. Assume that you are using the dividend growth model to value stocks. The underlying assumption of the dividend growth model is that a stock is worth: A. $. . D. currently pays no dividend. Which one of the following statements must be true given this information? A. I and IV only C. . .. B. . II only C. Jack is assured one seat on the board. If straight voting applies. . Seven years from now. select the senior management of the firm. market values of all stocks to decrease. A. elect the chief executive officer (CEO). To value this stock as of today. Inc. Regardless of the type of voting employed. considers capital gains but ignores the dividend yield. real rate of return. . . .. E. The company plans on retaining all of its earnings for the next six years. . . E. . A. legal battle for control of the firm based on your discontent as an individual shareholder. R = (P0 D0) + g D. a rate which is most likely not sustainable over an extended period of time. E. plus one. dividend yield. .g) 176. . can be used to compute a stock price at any point of time. II. I and II only D. Jack is assured one seat on the board. the present value of the future income which the stock generates. P0 = (D1 R) + g E.. . . The dividend growth model: I.10. The most likely result of this situation is a: A. 5. II only C. D. regardless of the number of shares owned. D. IV. to exercise control over the elections. If straight voting is used. C. E. I and II only B. negotiated settlement where you are granted control over one of the three open positions. market values of all stocks to increase. the company anticipates increasing the dividend by 4% annually. D. III.. . $. must own at least two-thirds of the shares.. . 171. R = (D1 P0) + g E. the company projects paying an annual dividend of $. . The company is anticipating dividends of $0. the same amount to every investor regardless of their desired rate of return. . a constant rate of 2 or more% per year. . . all of whom vote independently and all of whom want personal control over the firm. . Shareholders generally have the right to: I. . 169. three or more% per year. must either own enough shares to totally control the elections or else he/she has no control whatsoever. . B. . . remain constant B. . capital gains yield A. 4 B. . If cumulative voting applies.. C. III. . . A. A. B. has the right to veto the outcome of an election held by the common shareholders.62 E. Based on this information. 21. II. $30 E. has the right to declare the company bankrupt whenever there are insufficient funds to pay dividends to the common shareholders.40 D.87 and sell it at $26 a share.75% E.000 shares of this stock next year. A dealer will buy the stock at $22.000 for dividends payable. . are declared by the chief financial officer of the corporation. What is the market rate of return? A.. $55. . The earnings per share have increased by $1. First. A. The par value of the preferred stock is $100. IV. each share of 5% preferred stock is generally entitled to a liquidation payment of _____ as long as there are sufficient funds available.44 D. III.50 C. $11. II and III only D. Secondly.205 next year. The firm has 1. . . $1. $13. The current yield on Alpha's common stock is 4. $18.. . .88% D.5%. $3 B. 10. $5 C. dividend . the dividends increase by 4% annually and you require an 8% rate of return? A. must always show a current liability of $1. to another corporation may or may not represent taxable income to the recipient.25 192. What is the required rate of return on Alpha's stock? A. The stock is currently selling for $62.42 this year.. 45. .50 C. the company announced that all future dividends will increase by 4% annually. This dividend increases at an average rate of 3. $27. The dividend growth rate is expected to remain constant at the current level. . I and III only C. . . B. . D. . C.. has a general dividend policy whereby it pays a constant annual dividend of $1 per share of common stock. III. . . .10. I and II only B. $100 187. . . . 3. Which one of the following statements concerning preferred stock is correct? A.89. $20. E. .00 194. D. . must still declare each dividend before it becomes an actual company liability.. . If you are planning on buying 1. $6 C. 6.. .5% per year.5% C. is entitled to a distribution of income prior to the common shareholders. . and a net chg of -. .67 E. The par value of the preferred stock is $100. vote for company directors. III. II and III only D. $36. The stock price has increased by 3. I.60 B. 16.16 a share.. $50 E..42 higher than today's closing price. The closing price of a stock is quoted at 22. . . C. . Majestic Homes stock traditionally provides an 8% rate of return. . . 2. . closing price 33. $21. . The earnings per share are equal to 1/26th of $22.. 188.07% C. . II. . and IV only 189. . $60 185. The company now predicts that it will maintain a constant dividend since its business has leveled off and sales are expected to remain relatively constant. .87. . Angelina's made two announcements concerning its common stock today. $10 D. C.46 C. A stock listing contains the following information: P/E 17. 9.40. . $12 D. II. A. The current yield is 17. I and IV only D. . share in company profits. reduce the taxable income of the corporation.0142. .0% E. I only B. and IV only 183.10 dividend. E. D. . The earnings per share are approximately $1. has the right to collect payment on any unpaid dividends as long as the stock is noncumulative preferred. What is the maximum amount you are willing to pay to buy one share of this stock today? A. which is expected to increase by 5% per year. Preferred dividends must be paid timely each quarter or the unpaid dividends start accruing interest.. and $2.60 B.60. . the company announced that its next annual dividend has been set at $2. .00 B. vote on proposed mergers. What is one share of this stock worth to you today if the appropriate discount rate is 14%? A. . $7.88 E. The rumour is that the dividend will be $2. $22. I. 184. The company: A. residual assets in a liquidation. $16.42. . YTD% chg 3. . .4% during the current year. II and III only C. . $57. .. Lee Hong Imports paid a $1. $12.33 C. Preferred dividends must be paid quarterly provided the firm has net income that exceeds the amount of the quarterly dividend. Given the lack of future growth. .60 annual dividend on its common stock. . $1 B. 182. E. .00 190. Dividends are expected to increase by 5% annually.94% 195.5. $20.14 B. III. you will only buy this stock if you can earn at least a 15% rate of return..00 C. Mathilda's Vineyard recently paid a $3. All unpaid dividends on preferred stock. Preferred shareholders may be granted voting rights and seats on the board if preferred dividend payments remain unpaid.8%. has a liability which must be paid at a later date should the company miss paying an annual dividend payment. .00 per share annual dividend last week. II. with a P/E of 26 and a net change of 1. . II.04% B.000 shares of stock outstanding. . The company just paid a $2. . I.50.00 193. 186. A. IV. I and II only B. . is obligated to continue paying $1 per share per year. Martin's Yachts has paid annual dividends of $1. ..11 D. which one of the following statements is correct? A. $48. The closing price on the previous trading day was $32. .23 B. . IV. . III and IV only E. $34. and IV 181.63 191. . . . $7. $19. and IV only E. . to an individual becomes taxable income of that individual. . . receives tax-free dividends if it is an individual and own more than 20% of the outstanding preferred shares.180.80 annual dividend. C.4. A 6% preferred stock pays _____ a year in dividends per share. B. 5. $21.5% . B.. The stock increased in value between yesterday's close and today's close by $. $52. $11. . $70. The Scott Co. What is the maximum amount you should pay to purchase a share of Angelina's stock if your goal is to earn a 10% rate of return? A. . The owner of preferred stock: A. II.80 E. 43. .5% D.80.. I and IV only C. . In a liquidation.75. The company just paid a $2 a year dividend. how much should you expect to pay per share if the market rate of return for this type of security is 9% at the time of your purchase? A. Which of the following statements are correct given this information? I. must be paid before any income can be distributed to common shareholders. respectively.00 a share over the past three years. The closing price on the previous day was $1.87. III. E. III. D.. . I. I. $10. will be declared in default and can face bankruptcy if it does not pay $1 per year to each shareholder on a timely basis. . $20. Common stock shareholders are generally granted rights which include the right to: I. regardless of the type of preferred. How much are you willing to pay for one share of stock if the company just paid a $. Unpaid preferred dividends are a liability of the firm. . . The dividends paid by a corporation: I. . and IV only E. .89 E.67 D. .13 D. .10 a share. $20.5% B. 20 annual dividend.36 C. the company paid $1. .21 D. . .50. . $11.. what is this stock worth today? A. $23. how much should you expect to pay for 100 shares when you can afford to buy this stock? Ignore trading costs. is expecting its ice cream sales to decline due to the increased interest in healthy eating. . What is the maximum you are willing to spend per share to buy GH stock if the company pays a constant $3.80 per share.98% D. 11.70 a share which equated to a dividend yield of 1. . 5. Mother and Daughter Enterprises is a relatively new firm that appears to be on the road to great success. . Inc.5% B. . . Once the dividend amount becomes zero. $2.. Wilbert's Clothing Stores just paid a $1. .14. 5. The company has a policy whereby the dividend increases by 2. $21. . .78 E. After that time. 6. The common stock of Grady Co. . . $7. . Bill Bailey and Sons pays no dividend at the present time. 5. $21.. $17.79 205. .30.87 D. $23. $2. . The last dividend paid was $1. .42 a share and that all future dividends are expected to increase by 2. is expecting a period of intense growth. .. . 8. The last dividend was paid last year. the company paid $1.82 B. The company has announced plans to lower the dividend by $.88 D. $36.766 E. $32. . Now or Later.5% annually.48 C. . so it has decided to retain more of its earnings to help finance that growth. $37. 14. common stock are currently selling for $27. The Extreme Reaches Corp.09 E. respectively.. . . $5. $4.14 D. Last year.5% annually thereafter. 6.17 C. $1.28 E.. $5. A stock pays a constant annual dividend and sells for $31. .71 207. You place a required rate of return of 16% on this particular stock given the company's situation.43 213.21 E. $1. Beginning five years from now. . $1.86 a share at a market rate of return of 9.50. $48. The projected dividends for the next five years are $. recently paid $1.2% B. . $43. $1. As a result it is going to reduce its annual dividend by 10% a year for the next three years. $20. . . $1.640 B.00% C.90 B. . . $29. $21.. The last dividend it paid was $0. $14.76 B. The Lighthouse Co.50 annual dividend per share? A. $33. the company has announced that it will be reducing its annual dividend by 5% a year for the next two years. is a very cyclical type of business which is reflected in its dividend policy.90 a share.22. the company will cease all dividends permanently. and $10. . . What is one share of this stock worth to you today? A. . A.91% 206. After that time. . $.00..28 a share. $11. is preparing to pay its first dividends. The company plans to double each annual dividend payment for the next three years.50% B. What is the market price of this stock if the market rate of return is 15%? A. . $2.50 annual dividend last year.5% C. After that. .810 204. If the rate of return on this stock is 9%. .00% C. $21. 11. . $23. 12.25 C. ..39 C.25 per share indefinitely.02 D.25 over the next four years. What is one share of this stock worth today if the market rate of return on similar securities is 11. Inc.20. $10. . What is the rate of growth of its dividend? A.98 209. $5. The company plans to start paying an annual dividend in the amount of $. $3.0% C. 1. . .95 E. . What is the market value of this stock if the required rate of return is 13%? A.681 C.23 ..196. $. $7. . What is this stock worth to you per share if you demand a 7% rate of return? A. $. Turnips and Parsley common stock sells for $39. .80 C. How much will one share of this stock be worth five years from now if the required rate of return is 12%? A.01 215. has adopted a policy of increasing the annual dividend on its common stock at a constant rate of 3% annually.00.58 210.5% E. What is the expected amount of the next dividend to be paid on Energizer's common stock? A.40 C.33 199. The company paid a $2. The common stock of Energizer's pays an annual dividend that is expected to increase by 10% annually.. $18. $1. $15. . . $26. . .79 B.08 E. Shares of the Katydid Co. The company is planning on paying $3. The dividend amount was $.40. 13. $.62 B. . the company plans on paying a constant $1 a share dividend indefinitely. .73. . $1.00. $11. . . $4. The Reading Co.25% rate of return last year.. $1. . The company paid its first annual dividend yesterday in the amount of $.07 E. it is planning on paying a constant $1.98 E.20. The company just paid its annual dividend of $1.5% D.50.22 D. the dividends will be held constant at $1. Thus.33 E. $12.64 D. $26. $4.06 208. .04 D. At an 8% rate of return. $1.60 a share. $34.00. .43 212.57 C..5%.29 E. but need an expected 12% rate of return to compensate for the perceived risk of such ownership. and $1.50 per share annual dividend. .75. ..50 a share.93 C. After that time. $20.00 a share over the next four years. After that. . . You would like to purchase 100 shares of stock in this firm but realize that you will not have the funds to do so for another three years.46 E. 12. Inc. returned an 11. . the dividend is expected to increase by 2% annually. . What is one share of this stock worth to you if you require an 8% rate of return on similar investments? A. .93 E. Future dividends are projected at $1. $29. Beaksley.. $53.5% annually. $1. $22.10 D. . . $24. last paid a $1.39 D.50 a year. $5.04 B.5%. $2.46 D. The stock commands a market rate of return of 12% and sells for $60. . 9. $21.18.25% E. What will its dividend be in six years? A. If you desire a 10% rate of return. $5. At what rate is the dividend growing? A.40 E.80 201.75% D. Can't Hold Me Back. 13. The Merriweather Co. .. Bet'R Bilt Bikes just announced that its annual dividend for this coming year will be $2.. Five years from now. What was the rate of price appreciation on the stock? A. .90 B. $1.10 as an annual dividend.9% D. The firm pays a $2. it will maintain a constant dividend of $1 a share. . $1. the company has stated that the annual dividend will be $1..05% E.57 D. The Double Dip Co. $6. . After that it will maintain a constant dividend of $.87 E.40 per share. respectively. . $11.00 C. How much are you willing to pay to buy a share of this stock if your required return is 14%? A.08 C.3% 203. $25. .18 214.60 and establishing a policy whereby the dividend will increase by 3.13 E. .723 D..21 C. $9. and $1. $19. is in a downsizing mode.86 B.20 D. $1. . . respectively. Nu-Tek.40 B.20 B. . just announced that it is increasing its annual dividend to $1. $9. $1. . 4. .59 202. $12. $14.41 B. what is the dividend amount? A.0% 197. . What is this stock worth to you if you require a 9% rate of return? A. $8. .39 211. It is going to pay $1. 15. . $22. You have decided that you would like to own some shares of GH Corp. $5.50 per share per year. What is the market rate of return if this stock is currently selling for $22 a share? A. $11. $1. $8. $. Inc. . respectively.04 B. $34. $1. 5.30 a share for two years commencing two years from today. . $1. BC 'n D just paid its annual dividend of $. What is this stock worth today at a 6% discount rate? A. $7.5%? A. . $5. .75% 198.67 D.78 D. .11 200. $25. . Last year.22 C. . After that the dividend will be a constant $2. $21. .60 per share. . . the company is repurchasing all of the outstanding shares at a price of $50 a share. 9. .70 a share. .60 C.60 B. 2.00 a share over the next three years. The market rate of return is 10%.11 C. .0% E. and $5.00 a share dividend every other year..50% B. . .03 B. .50 per share indefinitely.48 B. .11 a share.
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