Question 1

A stock pays a constant annual dividend and sells for $56.10 a share.If the market rate of return on this stock is 12.5 percent,what is the amount of the next annual dividend?

Accepted Answer

A)  $5.67
B)  $5.94
C)  $6.21
D)  $6.84
E)  $7.30F) A) and B)
G) C) and D)

Question 2

Jen's Fashions is growing quickly.Dividends are expected to grow at a 19 percent rate for the next 3 years,with the growth rate falling off to a constant 8 percent thereafter.The required return is 12 percent and the company just paid a $3.80 annual dividend.What is the current share price?

Accepted Answer

A)  $128.96
B)  $131.11
C)  $135.95
D)  $148.87
E)  $152.20F) C) and D)
G) A) and E)

Question 3

Which one of the following rights is never directly granted to all shareholders of a publicly-held corporation?

Accepted Answer

A)  electing the board of directors
B)  receiving a distribution of company profits
C)  voting either for or against a proposed merger or acquisition
D)  determining the amount of the dividend to be paid per share
E)  having first chance to purchase any new equity shares that may be offeredF) B) and D)
G) C) and D)

Question 4

National Warehousing just announced it is increasing its annual dividend to $1.18 next year and establishing a policy whereby the dividend will increase by 3.25 percent annually thereafter.How much will one share of this stock be worth 8 years from now if the required rate of return is 9.5 percent?

Accepted Answer

A)  $24.38
B)  $25.68
C)  $26.51
D)  $27.02
E)  $27.37F) A) and B)
G) C) and E)

Question 5

The stream of customer orders coming in to the NYSE trading floor is called the:

Accepted Answer

A)  paper trail.
B)  trading volume.
C)  order flow.
D)  bid-ask spread.
E)  commission trail.F) B) and D)
G) A) and C)

Question 6

A market maker who acts as a dealer in one or more securities on the floor of the NYSE is called a:

Accepted Answer

A)  floor trader.
B)  floor post.
C)  specialist.
D)  floor broker.
E)  commission broker.F) A) and B)
G) D) and E)

Question 7

The counter area on the floor of the NYSE where a specialist operates is called a:

Accepted Answer

A)  pit.
B)  hot spot.
C)  seat.
D)  post.
E)  DOT.F) None of the above
G) A) and B)

Question 8

Home Canning Products common stock sells for $41.00 a share and has a market rate of return of 12.8 percent.The company just paid an annual dividend of $1.15 per share.What is the dividend growth rate?

Accepted Answer

A)  8.29 percent
B)  8.45 percent
C)  9.23 percent
D)  9.67 percent
E)  9.72 percentF) A) and D)
G) B) and D)

Question 9

Show Boat Dinner Theatres has paid annual dividends of $0.32,$0.52,and $0.60 a share over the past three years,respectively.The company now predicts that it will maintain a constant dividend since its business has leveled off and sales are expected to remain relatively flat.Given the lack of future growth,you will only buy this stock if you can earn at least a 19 percent rate of return.What is the maximum amount you are willing to pay for one share of this stock today?

Accepted Answer

A)  $2.43
B)  $3.16
C)  $4.43
D)  $4.69
E)  $4.82F) A) and D)
G) A) and E)

Question 10

Marie owns shares of Deltona Productions preferred stock which she says provides her with a constant 14.3 percent rate of return.The stock is currently priced at $45.45 a share.What is the amount of the dividend per share?

Accepted Answer

A)  $6.00
B)  $6.25
C)  $6.50
D)  $6.60
E)  $7.00F) All of the above
G) A) and E)

Question 11

Which one of the following represents the capital gains yield as used in the dividend growth model?

Accepted Answer

A)  D1
B)  D1/P0
C)  P0
D)  g
E)  g/P0F) B) and E)
G) B) and C)

Question 12

Dexter Metals,paid its first annual dividend yesterday in the amount of $0.18 a share.The company plans to double each annual dividend payment for the next 3 years.After that time,it plans to pay $1.25 a share for 2 years than then pay a constant dividend of $1.60 per share indefinitely.What is one share of this stock worth today if the market rate of return on similar securities is 10.24 percent?

Accepted Answer

A)  $12.32
B)  $12.77
C)  $13.20
D)  $14.26
E)  $14.79F) C) and E)
G) B) and C)

Question 13

Which one of the following statements is correct concerning the two-stage dividend growth model?

Accepted Answer

A)  G1 cannot be negative.
B)  Pt = Dt/R.
C)  G1 must be greater than G2.
D)  G1 can be greater than R.
E)  R must be less than G1 but greater than G2.F) A) and B)
G) A) and C)

Question 14

Which one of the following is a type of equity security that has a fixed dividend and a priority status over other equity securities?

Accepted Answer

A)  senior bond
B)  debenture
C)  warrant
D)  common stock
E)  preferred stockF) A) and B)
G) None of the above

Question 15

Which one of the following is the electronic system used by the NYSE for directly transmitting orders to specialists?

Accepted Answer

A)  OTCDOT
B)  SuperDOT
C)  Instinet
D)  Internet
E)  FloornetF) B) and C)
G) A) and C)

Question 16

Renew It,Inc.,is preparing to pay its first dividend.It is going to pay $0.45,$0.60,and $1 a share over the next three years,respectively.After that,the company has stated that the annual dividend will be $1.25 per share indefinitely.What is this stock worth to you per share if you demand a 10.8 percent rate of return on stocks of this type?

Accepted Answer

A)  $6.67
B)  $8.21
C)  $10.14
D)  $11.47
E)  $12.03F) None of the above
G) C) and E)

Question 17

The Blue Marlin is owned by a group of 5 shareholders who all vote independently and who all want personal control over the firm.What is the minimum percentage of the outstanding shares one of these shareholders must own if he or she is to gain personal control over this firm given that the firm uses straight voting?

Accepted Answer

A)  17 percent
B)  20 percent plus one vote
C)  25 percent plus one vote
D)  50 percent plus one vote
E)  51 percentF) B) and E)
G) A) and D)

Question 18

Westover Winds just paid a dividend of $2.10 per share.The company will increase its dividend by 8 percent next year and will then reduce its dividend growth rate by 2 percentage points per year until it reaches the industry average of 2 percent dividend growth,after which the company will keep a constant growth rate forever.What is the price of this stock today given a required return of 11 percent?

Accepted Answer

A)  $26.54
B)  $28.99
C)  $31.83
D)  $32.06
E)  $32.47F) A) and B)
G) A) and E)

Question 19

Which one of these statements related to preferred stock is correct?

Accepted Answer

A)  Preferred shareholders normally receive one vote per share of stock owned.
B)  Preferred shareholders determine the outcome of any election that involves a proxy fight.
C)  Preferred shareholders are considered to be the residual owners of a corporation.
D)  Preferred stock normally has a stated liquidating value of $1,000 per share.
E)  Cumulative preferred shares are more valuable than comparable non-cumulative shares.F) B) and C)
G) A) and D)

Question 20

An ECN is best described as:

Accepted Answer

A)  an electronic network which transmits orders directly to the floor of the NYSE.
B)  the network used in the primary market for selling newly issued shares.
C)  the international trading network of the NYSE.
D)  a website that allows individual investors to trade directly with one another.
E)  a computerized network used by independent brokers.F) All of the above
G) A) and B)

Exam 8: Stock Valuation

National Warehousing just announced it is increasing its annual dividend to $1.18 next year and establishing a policy whereby the dividend will increase by 3.25 percent annually thereafter.How much will one share of this stock be worth 8 years from now if the required rate of return is 9.5 percent?

Correct Answer
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Correct Answer
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Which one of the following statements is correct concerning the two-stage dividend growth model?

Correct Answer
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Correct Answer
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Jen's Fashions is growing quickly.Dividends are expected to grow at a 19 percent rate for the next 3 years,with the growth rate falling off to a constant 8 percent thereafter.The required return is 12 percent and the company just paid a $3.80 annual dividend.What is the current share price?

Correct Answer
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Marie owns shares of Deltona Productions preferred stock which she says provides her with a constant 14.3 percent rate of return.The stock is currently priced at $45.45 a share.What is the amount of the dividend per share?

Correct Answer
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The stream of customer orders coming in to the NYSE trading floor is called the:

Correct Answer
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Which one of the following rights is never directly granted to all shareholders of a publicly-held corporation?

Correct Answer
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Which one of the following is the electronic system used by the NYSE for directly transmitting orders to specialists?

Correct Answer
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Which one of these statements related to preferred stock is correct?

Correct Answer
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Correct Answer
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Correct Answer
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Which one of the following is a type of equity security that has a fixed dividend and a priority status over other equity securities?

Correct Answer
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Correct Answer
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An ECN is best described as:

Correct Answer
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A stock pays a constant annual dividend and sells for $56.10 a share.If the market rate of return on this stock is 12.5 percent,what is the amount of the next annual dividend?

Correct Answer
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Which one of the following represents the capital gains yield as used in the dividend growth model?

Correct Answer
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The counter area on the floor of the NYSE where a specialist operates is called a:

Correct Answer
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A market maker who acts as a dealer in one or more securities on the floor of the NYSE is called a:

Correct Answer
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Home Canning Products common stock sells for $41.00 a share and has a market rate of return of 12.8 percent.The company just paid an annual dividend of $1.15 per share.What is the dividend growth rate?

Correct Answer
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Exam 8: Stock Valuation

National Warehousing just announced it is increasing its annual dividend to $1.18 next year and establishing a policy whereby the dividend will increase by 3.25 percent annually thereafter.How much will one share of this stock be worth 8 years from now if the required rate of return is 9.5 percent?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which one of the following statements is correct concerning the two-stage dividend growth model?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Jen's Fashions is growing quickly.Dividends are expected to grow at a 19 percent rate for the next 3 years,with the growth rate falling off to a constant 8 percent thereafter.The required return is 12 percent and the company just paid a $3.80 annual dividend.What is the current share price?

Correct AnswerverifiedShow Answer

Marie owns shares of Deltona Productions preferred stock which she says provides her with a constant 14.3 percent rate of return.The stock is currently priced at $45.45 a share.What is the amount of the dividend per share?

Correct AnswerverifiedShow Answer

The stream of customer orders coming in to the NYSE trading floor is called the:

Correct AnswerverifiedShow Answer

Which one of the following rights is never directly granted to all shareholders of a publicly-held corporation?

Correct AnswerverifiedShow Answer

Which one of the following is the electronic system used by the NYSE for directly transmitting orders to specialists?

Correct AnswerverifiedShow Answer

Which one of these statements related to preferred stock is correct?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which one of the following is a type of equity security that has a fixed dividend and a priority status over other equity securities?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

An ECN is best described as:

Correct AnswerverifiedShow Answer

A stock pays a constant annual dividend and sells for $56.10 a share.If the market rate of return on this stock is 12.5 percent,what is the amount of the next annual dividend?

Correct AnswerverifiedShow Answer

Which one of the following represents the capital gains yield as used in the dividend growth model?

Correct AnswerverifiedShow Answer

The counter area on the floor of the NYSE where a specialist operates is called a:

Correct AnswerverifiedShow Answer

A market maker who acts as a dealer in one or more securities on the floor of the NYSE is called a:

Correct AnswerverifiedShow Answer

Home Canning Products common stock sells for $41.00 a share and has a market rate of return of 12.8 percent.The company just paid an annual dividend of $1.15 per share.What is the dividend growth rate?

Correct AnswerverifiedShow Answer

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