Question 1

The Sports Club plans to pay an annual dividend of $1.20 per share next year, $1.12 per share a year for the following two years, and then a final liquidating dividend of $14.20 per share four years from now. How much is one share of this stock worth to you today if you require a rate of return of 18.7 percent of this risky investment?

Accepted Answer

A)   $9.63
B)   $8.36
C)   $7.56
D)   $12.60
E)   $10.30F) B) and E)
G) A) and D)

Question 2

Miller's Hardware has 415,000 shares of stock outstanding with a current market value of $42 a share. You own 84,500 of those shares. Next month, the election will be held to select four new members to the board of directors. The firm uses a cumulative voting system. How much additional money do you need to spend to guarantee that you will be elected to the board assuming that everyone else votes for one of the other candidates?

Accepted Answer

A)   $0
B)   $28,518
C)   $34,062
D)   $62,958
E)   $98,910F) C) and E)
G) A) and E)

Question 3

Dividends are best defined as:

Accepted Answer

A)   cash payments to shareholders.
B)   cash payments to either bondholders or shareholders.
C)   cash or stock payments to shareholders.
D)   cash or stock payments to either bondholders or shareholders.
E)   distributions of stock to current shareholders.F) A) and B)
G) B) and E)

Question 4

River Rock, Inc., just paid an annual dividend of $2.80. The company has increased its dividend by 2.5 percent a year for the past 10 years and expects to continue doing so. What will a share of this stock be worth 6 years from now if the required return is 16 percent?

Accepted Answer

A)   $23.60
B)   $24.65
C)   $25.08
D)   $25.50
E)   $26.90F) B) and D)
G) B) and C)

Question 5

AZ stock closed today at $18.24, down .23. The dividend yield is 2.4 percent. What was yesterday's closing price if the firm pays a constant $.40 per share quarterly dividend?

Accepted Answer

A)   $16.67
B)   $18.01
C)   $16.90
D)   $18.47
E)   $17.40F) B) and D)
G) B) and E)

Question 6

Healthy Foods just paid its annual dividend of $1.62 a share. The firm recently announced that all future dividends will be increased by 2.1 percent annually. What is one share of this stock worth to you if you require a rate of return of 15.7 percent?

Accepted Answer

A)   $11.91
B)   $12.95
C)   $12.16
D)   $10.54
E)   $13.07F) A) and B)
G) B) and D)

Question 7

Which one of the following must equal zero if a firm pays a constant annual dividend?

Accepted Answer

A)   Dividend yield
B)   Capital gains yield
C)   Total return
D)   Par value per share
E)   Book value per shareF) C) and E)
G) B) and C)

Question 8

The Fish House is expected to pay annual dividends of $1.23 and $1.25 at the end of the next two years, respectively. After that, the company expects to pay a constant dividend of $1.35 a share. What is the value of this stock at a required return of 16.4 percent?

Accepted Answer

A)   $6.07
B)   $8.55
C)   $8.05
D)   $11.08
E)   $8.23F) A) and E)
G) C) and E)

Question 9

Today's stock market report shows that SW Companies has a PE ratio of 9.8, a dividend yield of 2.2 percent, a closing price $29.86, and a net change of .11. What is the annual dividend amount?

Accepted Answer

A)   $.66
B)   $1.08
C)   $1.13
D)   $1.28
E)   $1.33F) None of the above
G) B) and C)

Question 10

Solar Energy will pay an annual dividend of $1.93 per share next year. The company just announced that future dividends will be increasing by 1.6 percent annually. How much are you willing to pay for one share of this stock if you require a rate of return of 11.75 percent?

Accepted Answer

A)   $15.14
B)   $19.01
C)   $19.78
D)   $16.12
E)   $19.32F) A) and E)
G) D) and E)

Question 11

JLT is a mature manufacturing firm. The company just paid an annual dividend of $3.62, but management expects to reduce future payouts by 3.5 percent per year, indefinitely. What is this stock worth today at a required return of 12.5 percent?

Accepted Answer

A)   $21.42
B)   $21.83
C)   $20.24
D)   $23.56
E)   $20.02F) A) and E)
G) A) and B)

Question 12

Kate could not attend the last shareholders' meeting and thus she granted the authority to vote on her behalf to the managers of the firm. Which term applies to this granting of authority?

Accepted Answer

A)   Straight
B)   Cumulative
C)   Consent-form
D)   Proxy
E)   In absentiaF) None of the above
G) A) and B)

Question 13

Russell Foods pays a fixed annual dividend of $2.28 a share. At a required return of 11.5 percent, the stock is valued at $43.20 a share. What is the dividend growth rate at this price?

Accepted Answer

A)   5.99 percent
B)   5.28 percent
C)   6.12 percent
D)   5.37 percent
E)   6.22 percentF) All of the above
G) A) and B)

Question 14

The Three Amigos just paid an annual dividend of $.60 per share but plans to double that amount each year for three years. After that, the firm expects to maintain a constant dividend. What is the value of this stock today if the required return is 15 percent?

Accepted Answer

A)   $27.64
B)   $29.61
C)   $26.67
D)   $23.05
E)   $27.05F) D) and E)
G) B) and D)

Question 15

The more actively traded large companies that are listed on NASDAQ are traded in which one of the NASDAQ markets?

Accepted Answer

A)   National
B)   Capital
C)   Regional
D)   Global Select
E)   GlobalF) All of the above
G) B) and E)

Question 16

An agent who buys and sells securities from inventory is called a:

Accepted Answer

A)   floor trader.
B)   dealer.
C)   commission broker.
D)   broker.
E)   floor broker.F) A) and E)
G) All of the above

Question 17

Business Solutions is expected to pay its first annual dividend of $.84 per share in Year 3. Starting in Year 6, the company plans to increase the dividend by 2 percent per year. What is the value of this stock today, Year 0, at a required return of 14.4 percent?

Accepted Answer

A)   $5.01
B)   $8.09
C)   $8.29
D)   $7.03
E)   $9.34F) All of the above
G) A) and D)

Question 18

The Toy Chest will pay an annual dividend of $2.64 per share next year and currently sells for $48.30 a share based on a market rate of return of 11.67 percent. What is the capital gains yield?

Accepted Answer

A)   7.35 percent
B)   7.78 percent
C)   9.23 percent
D)   6.20 percent
E)   4.49 percentF) D) and E)
G) A) and D)

Question 19

NASDAQ is best described as:

Accepted Answer

A)   a modern-day trading floor with locations in Chicago and London.
B)   an electronic communication network.
C)   an electronic network of securities dealers.
D)   an internet broker?s market.
E)   a primary market.F) C) and D)
G) B) and D)

Question 20

The dividend yield on a stock will increase if the:

Accepted Answer

A)   dividend growth rate decreases.
B)   stock price decreases.
C)   capital gains rate decreases.
D)   stock price increases.
E)   tax rate on dividends increases.F) C) and E)
G) None of the above

Exam 7: Equity Markets and Stock Valuation

Correct Answer
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Solar Energy will pay an annual dividend of $1.93 per share next year. The company just announced that future dividends will be increasing by 1.6 percent annually. How much are you willing to pay for one share of this stock if you require a rate of return of 11.75 percent?

Correct Answer
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Healthy Foods just paid its annual dividend of $1.62 a share. The firm recently announced that all future dividends will be increased by 2.1 percent annually. What is one share of this stock worth to you if you require a rate of return of 15.7 percent?

Correct Answer
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NASDAQ is best described as:

Correct Answer
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Which one of the following must equal zero if a firm pays a constant annual dividend?

Correct Answer
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Today's stock market report shows that SW Companies has a PE ratio of 9.8, a dividend yield of 2.2 percent, a closing price $29.86, and a net change of .11. What is the annual dividend amount?

Correct Answer
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River Rock, Inc., just paid an annual dividend of $2.80. The company has increased its dividend by 2.5 percent a year for the past 10 years and expects to continue doing so. What will a share of this stock be worth 6 years from now if the required return is 16 percent?

Correct Answer
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JLT is a mature manufacturing firm. The company just paid an annual dividend of $3.62, but management expects to reduce future payouts by 3.5 percent per year, indefinitely. What is this stock worth today at a required return of 12.5 percent?

Correct Answer
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Kate could not attend the last shareholders' meeting and thus she granted the authority to vote on her behalf to the managers of the firm. Which term applies to this granting of authority?

Correct Answer
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The dividend yield on a stock will increase if the:

Correct Answer
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An agent who buys and sells securities from inventory is called a:

Correct Answer
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The Toy Chest will pay an annual dividend of $2.64 per share next year and currently sells for $48.30 a share based on a market rate of return of 11.67 percent. What is the capital gains yield?

Correct Answer
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The Fish House is expected to pay annual dividends of $1.23 and $1.25 at the end of the next two years, respectively. After that, the company expects to pay a constant dividend of $1.35 a share. What is the value of this stock at a required return of 16.4 percent?

Correct Answer
verified

Russell Foods pays a fixed annual dividend of $2.28 a share. At a required return of 11.5 percent, the stock is valued at $43.20 a share. What is the dividend growth rate at this price?

Correct Answer
verified

Dividends are best defined as:

Correct Answer
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The more actively traded large companies that are listed on NASDAQ are traded in which one of the NASDAQ markets?

Correct Answer
verified

Business Solutions is expected to pay its first annual dividend of $.84 per share in Year 3. Starting in Year 6, the company plans to increase the dividend by 2 percent per year. What is the value of this stock today, Year 0, at a required return of 14.4 percent?

Correct Answer
verified

The Three Amigos just paid an annual dividend of $.60 per share but plans to double that amount each year for three years. After that, the firm expects to maintain a constant dividend. What is the value of this stock today if the required return is 15 percent?

Correct Answer
verified

Correct Answer
verified

AZ stock closed today at $18.24, down .23. The dividend yield is 2.4 percent. What was yesterday's closing price if the firm pays a constant $.40 per share quarterly dividend?

Correct Answer
verified

Exam 7: Equity Markets and Stock Valuation

Correct AnswerverifiedShow Answer

Solar Energy will pay an annual dividend of $1.93 per share next year. The company just announced that future dividends will be increasing by 1.6 percent annually. How much are you willing to pay for one share of this stock if you require a rate of return of 11.75 percent?

Correct AnswerverifiedShow Answer

Healthy Foods just paid its annual dividend of $1.62 a share. The firm recently announced that all future dividends will be increased by 2.1 percent annually. What is one share of this stock worth to you if you require a rate of return of 15.7 percent?

Correct AnswerverifiedShow Answer

NASDAQ is best described as:

Correct AnswerverifiedShow Answer

Which one of the following must equal zero if a firm pays a constant annual dividend?

Correct AnswerverifiedShow Answer

Today's stock market report shows that SW Companies has a PE ratio of 9.8, a dividend yield of 2.2 percent, a closing price $29.86, and a net change of .11. What is the annual dividend amount?

Correct AnswerverifiedShow Answer

River Rock, Inc., just paid an annual dividend of $2.80. The company has increased its dividend by 2.5 percent a year for the past 10 years and expects to continue doing so. What will a share of this stock be worth 6 years from now if the required return is 16 percent?

Correct AnswerverifiedShow Answer

JLT is a mature manufacturing firm. The company just paid an annual dividend of $3.62, but management expects to reduce future payouts by 3.5 percent per year, indefinitely. What is this stock worth today at a required return of 12.5 percent?

Correct AnswerverifiedShow Answer

Kate could not attend the last shareholders' meeting and thus she granted the authority to vote on her behalf to the managers of the firm. Which term applies to this granting of authority?

Correct AnswerverifiedShow Answer

The dividend yield on a stock will increase if the:

Correct AnswerverifiedShow Answer

An agent who buys and sells securities from inventory is called a:

Correct AnswerverifiedShow Answer

The Toy Chest will pay an annual dividend of $2.64 per share next year and currently sells for $48.30 a share based on a market rate of return of 11.67 percent. What is the capital gains yield?

Correct AnswerverifiedShow Answer

The Fish House is expected to pay annual dividends of $1.23 and $1.25 at the end of the next two years, respectively. After that, the company expects to pay a constant dividend of $1.35 a share. What is the value of this stock at a required return of 16.4 percent?

Correct AnswerverifiedShow Answer

Russell Foods pays a fixed annual dividend of $2.28 a share. At a required return of 11.5 percent, the stock is valued at $43.20 a share. What is the dividend growth rate at this price?

Correct AnswerverifiedShow Answer

Dividends are best defined as:

Correct AnswerverifiedShow Answer

The more actively traded large companies that are listed on NASDAQ are traded in which one of the NASDAQ markets?

Correct AnswerverifiedShow Answer

Business Solutions is expected to pay its first annual dividend of $.84 per share in Year 3. Starting in Year 6, the company plans to increase the dividend by 2 percent per year. What is the value of this stock today, Year 0, at a required return of 14.4 percent?

Correct AnswerverifiedShow Answer

The Three Amigos just paid an annual dividend of $.60 per share but plans to double that amount each year for three years. After that, the firm expects to maintain a constant dividend. What is the value of this stock today if the required return is 15 percent?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

AZ stock closed today at $18.24, down .23. The dividend yield is 2.4 percent. What was yesterday's closing price if the firm pays a constant $.40 per share quarterly dividend?

Correct AnswerverifiedShow Answer

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