Question 1

The next dividend payment by HG Enterprises will be $1.82 per share with future increases of 2.8 percent annually. The stock currently sells for $38.70 per share. What is the dividend yield?

Accepted Answer

A)   4.20 percent
B)   4.70 percent
C)   4.81 percent
D)   4.56 percent
E)   4.41 percentF) C) and D)
G) A) and B)

Question 2

Dee's made two announcements concerning its common stock today. First, the company announced that the next annual dividend will be $1.58 a share. Secondly, all dividends after that will decrease by 1.15 percent annually. What is the value of this stock at a discount rate of 15.5 percent?

Accepted Answer

A)   $9.49
B)   $10.10
C)   $9.82
D)   $10.51
E)   $11.01F) C) and D)
G) A) and B)

Question 3

Dixie South currently pays an annual dividend of $1.46 a share and plans on increasing that amount by 2.75 percent annually. Northern Culture currently pays an annual dividend of $1.42 a share and plans on increasing its dividend by 3.1 percent annually. Given this information, you know for certain that the stock of Northern Culture has a higher ________ than the stock of Dixie South.

Accepted Answer

A)   market price
B)   dividend yield
C)   capital gains yield
D)   total return
E)   real returnF) C) and D)
G) B) and C) C

Question 4

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) A) and D)
G) B) and E)

Question 5

The Sly Fox pays a constant dividend of $1.46 a share. The company announced today that it will continue to pay the dividend for another 2 years and then in Year 3 it will pay a final liquidating dividend of $15.25 a share. What is one share of this stock worth today at a required return of 18.5 percent?

Accepted Answer

A)   $12.92
B)   $11.44
C)   $12.07
D)   $13.09
E)   $14.20F) None of the above
G) A) and C) B

Question 6

Jensen Shipping currently has an EPS of $2.31, a benchmark PE of 13.5, and an earnings growth rate of 2.3 percent. What is the target share price 4 years from now?

Accepted Answer

A)   $27.32
B)   $31.15
C)   $38.47
D)   $34.15
E)   $29.42F) B) and C)
G) A) and E)

Question 7

Which one of the following types of stock is defined by the fact that it receives no preferential treatment in respect to either dividends or bankruptcy proceedings?

Accepted Answer

A)   Dual class
B)   Cumulative
C)   Non-cumulative
D)   Preferred
E)   CommonF) B) and E)
G) B) and C)

Question 8

J&J Foods wants to issue 5.4 percent preferred stock with a stated liquidating value of $100 a share. The company has determined that stocks with similar characteristics provide a return of 8.2 percent. What should the offer price be?

Accepted Answer

A)   $67.26
B)   $61.38
C)   $64.20
D)   $65.85
E)   $64.60F) A) and E)
G) B) and C)

Question 9

Supernormal growth is a growth rate that:

Accepted Answer

A)   is both positive and follows a year or more of negative growth.
B)   exceeds a firm's previous year's rate of growth.
C)   is generally constant for an infinite period of time.
D)   is unsustainable over the long term.
E)   applies to a single, abnormal year.F) B) and E)
G) B) and C)

Question 10

A person on the floor of the NYSE who executes buy and sell orders on behalf of customers is called a(n) :

Accepted Answer

A)   designated market maker.
B)   dealer.
C)   specialist.
D)   supplemental liquidity provider.
E)   floor broker.F) B) and D)
G) A) and D)

Question 11

Whistle Stop pays a constant annual dividend of $4 on its stock. The company will maintain this dividend for the next 3 years and will then cease paying dividends forever. What is the current price per share if the required return on this stock is 15.6 percent?

Accepted Answer

A)   $10.38
B)   $9.52
C)   $9.04
D)   $9.28
E)   $10.02F) D) and E)
G) A) and B)

Question 12

Yummy Bakery just paid an annual dividend of $3.40 a share and is expected to increase that amount by 2.2 percent per year. If you are planning to buy 1,000 shares of this stock next year, how much should you expect to pay per share if the market rate of return for this type of security is 14.8 percent at the time of your purchase?

Accepted Answer

A)   $29.89
B)   $27.58
C)   $29.83
D)   $28.18
E)   $27.20F) A) and B)
G) C) and D)

Question 13

Nu-Tek has preferred stock outstanding that pays a cumulative $1.50 dividend per quarter. This company has not paid any of its dividends for the past two quarters. How much must be paid as a dividend for each share of preferred stock if the company plans to pay a dividend to its common shareholders this upcoming quarter?

Accepted Answer

A)   $0
B)   $4.50
C)   $1.50
D)   $6.00
E)   $3.00F) C) and D)
G) A) and B)

Question 14

Browning, Inc. owns 50,000 shares of preferred stock in Omega, Inc. What percentage, if any, of the dividend income received by Browning, Inc. from this investment is excluded from federal income taxation in 2018?

Accepted Answer

A)   0 percent
B)   100 percent
C)   25 percent
D)   70 percent
E)   50 percentF) A) and D)
G) B) and D)

Question 15

Chemical Mines has 5,000 shareholders and is preparing to elect two new board members. You do not own enough shares to personally control the elections but are determined to oust the current leadership. Likewise, no other single shareholder owns sufficient shares to personally control the outcome of the election. Which one of the following is the most likely outcome of this situation given that some shareholders are happy with the existing management?

Accepted Answer

A)   Negotiated settlement where each side is granted control over one of the open seats
B)   Protracted legal battle over control of the board of directors
C)   Arbitrated settlement where the arbitrator determines who will be elected to the board
D)   Control of the board decided without your influence
E)   Proxy fight for control of the boardF) All of the above
G) A) and B)

Question 16

AOK preferred stock pays an annual dividend of $6.50. What is the current price of this stock at a discount rate of 8.9 percent?

Accepted Answer

A)   $57.85
B)   $65.48
C)   $78.25
D)   $73.03
E)   $67.50F) A) and C)
G) B) and C)

Question 17

Flo's Flowers pays an annual dividend that increases by 1.8 percent per year, commands a market rate of return of 13.8 percent, and sells for $19.08 a share. What is the expected amount of the next dividend?

Accepted Answer

A)   $2.24
B)   $2.29
C)   $2.37
D)   $2.32
E)   $2.17F) All of the above
G) C) and D)

Question 18

Jensen Shipping has 38,400 shares outstanding and uses cumulative voting. The firm grants one vote for each share of common stock. What is the minimum number of votes required to obtain a seat on the board of directors if there are three open seats?

Accepted Answer

A)   12,800
B)   9,600
C)   12,801
D)   9,601
E)   19,201F) B) and D)
G) A) and D)

Question 19

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) None of the above

Question 20

The annual dividend yield is computed by dividing ________ annual dividend by the current stock price.

Accepted Answer

A)   this year's
B)   last year's
C)   next year's
D)   the past 5-year average
E)   the next 5-year averageF) A) and B)
G) A) and E) C

Exam 8: Stock Valuation

The next dividend payment by HG Enterprises will be $1.82 per share with future increases of 2.8 percent annually. The stock currently sells for $38.70 per share. What is the dividend yield?

Correct Answer
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Dee's made two announcements concerning its common stock today. First, the company announced that the next annual dividend will be $1.58 a share. Secondly, all dividends after that will decrease by 1.15 percent annually. What is the value of this stock at a discount rate of 15.5 percent?

Correct Answer
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C

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

Correct Answer
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B

Jensen Shipping currently has an EPS of $2.31, a benchmark PE of 13.5, and an earnings growth rate of 2.3 percent. What is the target share price 4 years from now?

Correct Answer
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Which one of the following types of stock is defined by the fact that it receives no preferential treatment in respect to either dividends or bankruptcy proceedings?

Correct Answer
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J&J Foods wants to issue 5.4 percent preferred stock with a stated liquidating value of $100 a share. The company has determined that stocks with similar characteristics provide a return of 8.2 percent. What should the offer price be?

Correct Answer
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Supernormal growth is a growth rate that:

Correct Answer
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A person on the floor of the NYSE who executes buy and sell orders on behalf of customers is called a(n) :

Correct Answer
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Whistle Stop pays a constant annual dividend of $4 on its stock. The company will maintain this dividend for the next 3 years and will then cease paying dividends forever. What is the current price per share if the required return on this stock is 15.6 percent?

Correct Answer
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Correct Answer
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Correct Answer
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Browning, Inc. owns 50,000 shares of preferred stock in Omega, Inc. What percentage, if any, of the dividend income received by Browning, Inc. from this investment is excluded from federal income taxation in 2018?

Correct Answer
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Correct Answer
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AOK preferred stock pays an annual dividend of $6.50. What is the current price of this stock at a discount rate of 8.9 percent?

Correct Answer
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Flo's Flowers pays an annual dividend that increases by 1.8 percent per year, commands a market rate of return of 13.8 percent, and sells for $19.08 a share. What is the expected amount of the next dividend?

Correct Answer
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Jensen Shipping has 38,400 shares outstanding and uses cumulative voting. The firm grants one vote for each share of common stock. What is the minimum number of votes required to obtain a seat on the board of directors if there are three open seats?

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 annual dividend yield is computed by dividing ________ annual dividend by the current stock price.

Correct Answer
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C

Exam 8: Stock Valuation

The next dividend payment by HG Enterprises will be $1.82 per share with future increases of 2.8 percent annually. The stock currently sells for $38.70 per share. What is the dividend yield?

Correct AnswerverifiedShow Answer

Dee's made two announcements concerning its common stock today. First, the company announced that the next annual dividend will be $1.58 a share. Secondly, all dividends after that will decrease by 1.15 percent annually. What is the value of this stock at a discount rate of 15.5 percent?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedC

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedB

Jensen Shipping currently has an EPS of $2.31, a benchmark PE of 13.5, and an earnings growth rate of 2.3 percent. What is the target share price 4 years from now?

Correct AnswerverifiedShow Answer

Which one of the following types of stock is defined by the fact that it receives no preferential treatment in respect to either dividends or bankruptcy proceedings?

Correct AnswerverifiedShow Answer

J&J Foods wants to issue 5.4 percent preferred stock with a stated liquidating value of $100 a share. The company has determined that stocks with similar characteristics provide a return of 8.2 percent. What should the offer price be?

Correct AnswerverifiedShow Answer

Supernormal growth is a growth rate that:

Correct AnswerverifiedShow Answer

A person on the floor of the NYSE who executes buy and sell orders on behalf of customers is called a(n) :

Correct AnswerverifiedShow Answer

Whistle Stop pays a constant annual dividend of $4 on its stock. The company will maintain this dividend for the next 3 years and will then cease paying dividends forever. What is the current price per share if the required return on this stock is 15.6 percent?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Browning, Inc. owns 50,000 shares of preferred stock in Omega, Inc. What percentage, if any, of the dividend income received by Browning, Inc. from this investment is excluded from federal income taxation in 2018?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

AOK preferred stock pays an annual dividend of $6.50. What is the current price of this stock at a discount rate of 8.9 percent?

Correct AnswerverifiedShow Answer

Flo's Flowers pays an annual dividend that increases by 1.8 percent per year, commands a market rate of return of 13.8 percent, and sells for $19.08 a share. What is the expected amount of the next dividend?

Correct AnswerverifiedShow Answer

Jensen Shipping has 38,400 shares outstanding and uses cumulative voting. The firm grants one vote for each share of common stock. What is the minimum number of votes required to obtain a seat on the board of directors if there are three open seats?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The annual dividend yield is computed by dividing ________ annual dividend by the current stock price.

Correct AnswerverifiedC

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C

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B

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C