Exam 8: Stock Valuation

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.

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

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?

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?

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

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?

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?

Supernormal growth is a growth rate that:

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?

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?

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?

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?

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?

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?

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

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?

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?

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

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?

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?