Question 1

The required return on a stock is equal to which one of the following if the dividend on the stock decreases by a constant percent per year?

Accepted Answer

A) (P0/D1) - g 
B) (D1/P0)/g 
C) Dividend yield + Capital gains yield 
D) Dividend yield - Capital gains yield 
E) Dividend yield × Capital gains yield 
A) (P0/D1) - g 
B) (D1/P0)/g 
C) Dividend yield + Capital gains yield 
D) Dividend yield - Capital gains yield 
E) Dividend yield × Capital gains yield

Question 2

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. 
A) dividend growth rate decreases. 
B) stock price decreases. 
C) capital gains rate decreases. 
D) stock price increases. 
E) tax rate on dividends increases.

Question 3

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

Question 4

Sugar Cookies will pay an annual dividend of $1.23 a share next year.The firm expects to increase this dividend by 8 percent per year the following four years and then decrease the dividend growth to 2 percent annually thereafter.Which one of the following is the correct computation of the dividend for Year 7?

Accepted Answer

A) ($1.23) × (1.08 × 4) × (1.02 × 3) 
B) ($1.23) × (1.08 × 4) × (1.02 × 2) 
C) ($1.23) × (1.08)4 × (1.02)2 
D) ($1.23) × (1.08)4 × (1.02)3 
E) ($1.23) × (1.08)4 × (1.02)4 
A) ($1.23) × (1.08 × 4) × (1.02 × 3) 
B) ($1.23) × (1.08 × 4) × (1.02 × 2) 
C) ($1.23) × (1.08)4 × (1.02)2 
D) ($1.23) × (1.08)4 × (1.02)3 
E) ($1.23) × (1.08)4 × (1.02)4

Question 5

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

Question 6

Opulance Corp.common stock is selling for $44.25 a share and has a dividend yield of 1.9 percent.What is the dividend amount?

Accepted Answer

A) $..0.42 
B) $.0.84 
C) $4.20 
D) $6.20 
E) $8.40 
A) $..0.42 
B) $.0.84 
C) $4.20 
D) $6.20 
E) $8.40

Question 7

Which statement is true?

Accepted Answer

A) From a legal perspective, preferred stock is a form of corporate equity. 
B) All classes of stock must have equal voting rights per share. 
C) Common shareholders elect the corporate directors while the preferred shareholders vote on mergers and acquisitions. 
D) Preferred dividends provide tax-free income to individual investors. 
E) Preferred shareholders prefer noncumulative dividends over cumulative dividends. 
A) From a legal perspective, preferred stock is a form of corporate equity. 
B) All classes of stock must have equal voting rights per share. 
C) Common shareholders elect the corporate directors while the preferred shareholders vote on mergers and acquisitions. 
D) Preferred dividends provide tax-free income to individual investors. 
E) Preferred shareholders prefer noncumulative dividends over cumulative dividends.

Question 8

The common stock of Zeta Group sells for $42 per share, has a rate of return of 12.2 percent, and a dividend growth rate of 1.8 percent annually.What was the amount of the last annual dividend paid?

Accepted Answer

A) $3.82 
B) $3.85 
C) $4.29 
D) $4.57 
E) $4.35 
A) $3.82 
B) $3.85 
C) $4.29 
D) $4.57 
E) $4.35

The required return on a stock is equal to which one of the following if the dividend on the stock decreases by a constant percent per year?

The dividend yield on a stock will increase if the:

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?

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?

Opulance Corp.common stock is selling for $44.25 a share and has a dividend yield of 1.9 percent.What is the dividend amount?

Which statement is true?

The common stock of Zeta Group sells for $42 per share, has a rate of return of 12.2 percent, and a dividend growth rate of 1.8 percent annually.What was the amount of the last annual dividend paid?

Introduction to Financial Management

Financial Statements, Taxes, and Cash Flow

Working With Financial Statements

Introduction to Valuation: the Time Value of Money

Discounted Cash Flow Valuation

Interest Rates and Bond Valuation

Net Present Value and Other Investment Criteria

Making Capital Investment Decisions

Some Lessons From Capital Market History

Risk and Return

Cost of Capital

Leverage and Capital Structure

Dividends and Dividend Policy

Raising Capital

Short-Term Financial Planning

Working Capital Management

International Aspects of Financial Management

Filters

Exam 7: Equity Markets and Stock Valuation

The required return on a stock is equal to which one of the following if the dividend on the stock decreases by a constant percent per year?

The dividend yield on a stock will increase if the:

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?

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?

Opulance Corp.common stock is selling for $44.25 a share and has a dividend yield of 1.9 percent.What is the dividend amount?

Which statement is true?

The common stock of Zeta Group sells for $42 per share, has a rate of return of 12.2 percent, and a dividend growth rate of 1.8 percent annually.What was the amount of the last annual dividend paid?

Introduction to Financial Management

Financial Statements, Taxes, and Cash Flow

Working With Financial Statements

Introduction to Valuation: the Time Value of Money

Discounted Cash Flow Valuation

Interest Rates and Bond Valuation

Net Present Value and Other Investment Criteria

Making Capital Investment Decisions

Some Lessons From Capital Market History

Risk and Return

Cost of Capital

Leverage and Capital Structure

Dividends and Dividend Policy

Raising Capital

Short-Term Financial Planning

Working Capital Management

International Aspects of Financial Management

Filters