Exam 6: Common Stock Valuation

Blue Water Tours has paid annual dividends of $2.10, $2.12, $2.15, $2.15, and $2.22 over the past 5 years, respectively. What is the arithmetic average growth rate for these dividends?

Ultra Fine Furnishings is in the process of selling its peripheral businesses and focusing on its upscale clients. In conjunction with this reorganization, the dividend will be decreased by 10 percent for the next 3 years. After that, the dividend will resume increasing at an annual rate of 5 percent. The required return on this stock is 14 percent and the last dividend paid was $2.40 a share. What is one share of this stock worth today?

The model used to value the stock of a firm which has a short-term growth rate that varies from its long-term growth rate is called the ________ dividend growth model.

The net income per share divided by the market price per share is called the:

Comfort Ice Cream has plans to pay decreasing annual dividends of $1.75, $1.60, and $1.45 over the next three years, respectively. After that, the firm will increase the dividend by 4 percent each year. What is the value of this stock today at a discount rate of 12 percent?

Roy's Markets has net income of $392,000. The firm has 200,000 shares of common stock outstanding. The dividend for this year is $.95 per share. What is the retention ratio?

L.B. Jay has net income of $38,000, total assets of $437,000, total liabilities of $208,000, and a price-book ratio of 3.8. There are 60,000 shares of stock outstanding. What is the firm's price-earnings ratio?

Toys Galore has historically had a P/E ratio of 18.5. This ratio is considered a good estimate of the future ratio. The firm currently has EPS of $2.10. These earnings are expected to increase by 5.0 percent next year. What is the expected price of this stock one year from now?

Lakeside Sheet Metal is downsizing and plans on completely closing three years from now. The firm's liquidation plan calls for annual dividends of $3, $6, and $36 over the next three years, respectively. What is the current value of this stock given a discount rate of 14 percent?

The Back Room just paid an annual dividend of $1.75 a share. The firm expects to pay dividends forever and to increase the dividend by 3.5 percent annually. What is the expected value of this stock six years from now if the discount rate is 10 percent?

Over the past 5 years, DL Insulation has paid annual dividends of $1.40, $1.55, $1.70, $1.73, and $1.77 per share. What is the geometric average dividend growth rate for this period?

Which one of the following is a requirement of the two-stage dividend growth model?

Wilkinson and Daughters has net income of $415,400, total assets of $2.2 million, and total liabilities of $1.08 million. The company paid $270,000 in dividends. What is the firm's sustainable rate of growth?

Canadian Adventures has earnings per share of $2.86 and dividends per share of $1.80. The total equity of the firm is $750,000. There are 38,000 shares of stock outstanding. What is the sustainable rate of growth?

Upwind Tours just announced that it will pay an annual dividend of $3.60 a share one year from now. Two years from now, the company expects to pay a $28 a share liquidating dividend. After that, the company will cease operations. What is the current value per share at a discount rate of 12.5 percent?

Knit 'n Needle started paying dividends 4 years ago. The annual dividends thus far have been $.35, $.38, $.42, and $.48, respectively. What is the arithmetic average dividend growth rate?

The Satellite Shoppe has current sales per share of $10.55. The sales per share are expected to increase at an annual rate of 12 percent. The historical P/E ratio is 16.2 and the historical P/S ratio is 9.8. What is the expected price of this stock one year from now?

Newcomer Mills is a relatively new firm which will retain all of its earnings for the next four years. Four years from now, the firm expects to pay its first dividend of $.25 a share. After that, it intends to increase the dividend by 4 percent annually. What is the value of this stock today at a discount rate of 12 percent?

Long Life Floors just paid an annual dividend of $.82 a share and plans on increasing future dividends by 2 percent annually. The discount rate is 15 percent. What will the value of this stock be five years from today?

The Grand Isle has 12,000 shares of stock outstanding at a market price of $31.60 per share. The book value per share is $21.08. The firm has earnings per share of $3.34 and a dividend payout ratio of .40. What is the firm's sustainable rate of growth?