Exam 6: Common Stock Valuation

A firm has a current book value per share of $21.10 and a market price per share of $37.57. Next year's earnings are expected to be $5.60 per share and the expected earnings growth rate is 2.5 percent. What is the required rate of return on this stock?

What is the market value of a share of stock divided by the net income per share called?

Cayman Boats plans to pay a $1.75 a share dividend at the end of each of the next 2 years. At the end of Year 3, it will pay a final liquidating dividend of $25 a share. After that, the company plans to close its doors permanently. What is the current value of this stock at a discount rate of 10 percent?

What is a method for valuing stock in a company that does not pay dividends?

Which one of the following statements related to the price-earnings (P/E)ratio is correct?

Beach & Company reported EBIT of $40 million for last year. Depreciation expense totaled $18 million and capital expenditures came to $8 million. Free cash flow is expected to grow at a rate of 5 rate for the foreseeable future. Beach faces a 21 percent tax rate and has a .50 debt to equity ratio with $200 million (market value)in debt outstanding. Beach's equity beta is 1.25, the risk-free rate is currently 4.5 rate and the market risk premium is estimated to be 8 percent. What is the current total value of Beach & Company (in millions)?

CB Industries stock is valued at $16.80 a share. The firm pays annual dividends at an increasing rate of 4.5 percent annually. Next year's dividend will be $1.90 per share. What is the required return on this stock?

Home Interiors has net income of $258,000. The firm has decided to pay $140,000 of that income out to the shareholders. What is the firm's retention ratio?

Lambert Corporation reported EBIT of $60 million for last year. Depreciation expense totaled $20 million and capital expenditures came to $5 million. Free cash flow is expected to grow at a rate of 4.5 percent for the foreseeable future. Lambert faces a 21 percent tax rate and has a .45 debt to equity ratio with $255 million (market value)in debt outstanding. Lambert's equity beta is 1.30, the risk-free rate is currently 5 percent, and the market risk premium is estimated to be 6.5 percent. What is the current total value of Lambert's equity (in millions)?

Which one of the following is a correct formula for computing a geometric average dividend growth rate?

The Boston House increases its dividend each year. The next annual dividend is expected to be $2.25 a share. Future dividends will increase by 5.0 percent annually. What is the current value of this stock if the discount rate is 13 percent?

You would like to know the value of a firm's equity today in relation to the cost of that equity. Which one of the following ratios will provide you with this information?

What is the percentage of a firm's net income which is reinvested in the firm to support future growth called?

Leslie Apparel has a current book value per share of $15.23 and current earnings per share of $1.93. The required return is 8 percent and the expected earnings growth rate is 4.5 percent. What is one share of this stock worth today?

The sustainable growth rate is equal to:

Which one of the following correctly expresses the clean surplus relationship?

The price-book ratio is computed as the market value per share divided by the per share book value of:

Hypo Tech expects its net income to grow at 20 percent a year for the next two years and then taper off to a constant 5 percent annual rate of growth. The firm maintains a constant dividend payout ratio. Which one of the following models is best suited for computing the current value of this firm's stock?

Value stocks are generally described as having which one of the following characteristics?

A stock sells for $12.36 a share and has a required return of 9 percent. Dividends are paid annually and increase at a constant 3 percent per year. What is the amount of the last dividend paid?