Question 1

The preferred dividend is generally stated as a percentage of the _____.

Accepted Answer

A)  market value of the share 
B)  net sales 
C)  call premium 
D)  par value 
E)  sinking fund 
A)  market value of the share 
B)  net sales 
C)  call premium 
D)  par value 
E)  sinking fund

Question 2

A firm expects to pay dividends at the end of each of the next four years of $2.00, $1.50, $2.50, and $3.50. If growth is then expected to level off at 8 percent, and if you require a 14 percent rate of return, how much should you be willing to pay for this stock?

Accepted Answer

A)  $67.81 
B)  $22.49 
C)  $58.15 
D)  $31.00 
E)  $43.97 
A)  $67.81 
B)  $22.49 
C)  $58.15 
D)  $31.00 
E)  $43.97

Question 3

American depository receipts (ADRs) are foreign stocks listed on a domestic exchange.

Accepted Answer

A) True 
 B)False

Question 4

The EVA of a firm is $6.25 million and the firm has 2.78 million outstanding shares. What is the maximum amount of dividend that can be paid to shareholders?

Accepted Answer

A)  $1.65 
B)  $2.25 
C)  $3.12 
D)  $3.89 
E)  $4.41 
A)  $1.65 
B)  $2.25 
C)  $3.12 
D)  $3.89 
E)  $4.41

Question 5

Which of the following securities have the highest priority with regard to earnings and assets of a firm?

Accepted Answer

A)  Corporate bonds 
B)  Preferred stock 
C)  Common stock 
D)  American depository receipts (ADRs) 
E)  Foreign stocks 
A)  Corporate bonds 
B)  Preferred stock 
C)  Common stock 
D)  American depository receipts (ADRs) 
E)  Foreign stocks

Question 6

A common stock of a firm will have a maturity period of 10 years.

Accepted Answer

A) True 
 B)False

Question 7

When using the Dividend Discount Model, assuming that growth (g) will remain constant, under which of the following circumstances will the dividend yield be equal to the required return on a common stock (rs)?

Accepted Answer

A)  g = 0 
B)  g > 0 
C)  g  rs 
A)  g = 0 
B)  g > 0 
C)  g  rs

Question 8

The common stockholders have the right to _____.

Accepted Answer

A)  vote for the changes in the firm's charter 
B)  convert their stock into a bond 
C)  receive the cash distributions before the preferred stockholders 
D)  determine the market value of their share 
E)  receive cumulative dividends 
A)  vote for the changes in the firm's charter 
B)  convert their stock into a bond 
C)  receive the cash distributions before the preferred stockholders 
D)  determine the market value of their share 
E)  receive cumulative dividends

Question 9

A protective feature on a preferred stock that requires preferred dividends previously not paid to be disbursed before any common stock dividends can be paid is called _____.

Accepted Answer

A)  par value 
B)  voting rights 
C)  cumulative dividends 
D)  sinking fund 
E)  preemptive right 
A)  par value 
B)  voting rights 
C)  cumulative dividends 
D)  sinking fund 
E)  preemptive right

Question 10

A stock's par value is equal to the market value of the stock on the last day of the fiscal year for a firm.

Accepted Answer

A) True 
 B)False

Question 11

Stock owned by the organizers of the firm who will have full voting rights is:

Accepted Answer

A)  preferred stock. 
B)  common equity. 
C)  founders' shares. 
D)  convertible equity. 
E)  retained earnings. 
A)  preferred stock. 
B)  common equity. 
C)  founders' shares. 
D)  convertible equity. 
E)  retained earnings.

Question 12

The last dividend on Spirex Corporation's common stock was $4.00, and the expected growth rate is 10 percent. If you require a rate of return of 20 percent, what is the highest price you should be willing to pay for this stock?

Accepted Answer

A)  $38.50 
B)  $40.00 
C)  $45.69 
D)  $44.00 
E)  $50.00 
A)  $38.50 
B)  $40.00 
C)  $45.69 
D)  $44.00 
E)  $50.00

Question 13

A firm has an EBIT of $22 million, total invested capital of $74 million, and the average cost of funds of 12%. The firm has a marginal tax rate of 35% and 4.2 million shares of the firm are outstanding. What is the EVA of the firm?

Accepted Answer

A)  $4.83 million 
B)  $5.42 million 
C)  $6.33 million 
D)  3.61 million 
E)  $7.97 million 
A)  $4.83 million 
B)  $5.42 million 
C)  $6.33 million 
D)  3.61 million 
E)  $7.97 million

Question 14

The constant growth Dividend Discount Model (DDM) may be written as _____.

Accepted Answer

A)  r0 = D0/(P0 + g) 
B)  P0 = D0/(rs + g) 
C)  P0 = D0/(rs − g) 
D)  P0 = D1/(rs - g) 
E)  r0 = D0/(P0 - g) 
A)  r0 = D0/(P0 + g) 
B)  P0 = D0/(rs + g) 
C)  P0 = D0/(rs − g) 
D)  P0 = D1/(rs - g) 
E)  r0 = D0/(P0 - g)

Question 15

Which of the following provisions will call for the repurchase and retirement of a given percentage of the preferred stock each year?

Accepted Answer

A)  Participation 
B)  Cumulative dividends 
C)  Sinking fund 
D)  Preemptive right 
E)  Call provision 
A)  Participation 
B)  Cumulative dividends 
C)  Sinking fund 
D)  Preemptive right 
E)  Call provision

Question 16

Which of the following is true about the payment of dividends by a firm?

Accepted Answer

A)  Dividends are paid only to the bondholders of the firm 
B)  Common stockholders have priority over preferred stockholders with regard to dividends 
C)  Preferred stocks will pay accumulated dividends only once i.e. at the time of maturity 
D)  Growth stocks pay little or no dividends and instead retain most of their earnings each year 
E)  Common stockholders will receive a fixed amount of dividend every year 
A)  Dividends are paid only to the bondholders of the firm 
B)  Common stockholders have priority over preferred stockholders with regard to dividends 
C)  Preferred stocks will pay accumulated dividends only once i.e. at the time of maturity 
D)  Growth stocks pay little or no dividends and instead retain most of their earnings each year 
E)  Common stockholders will receive a fixed amount of dividend every year

Question 17

On January 1, 2016, the price of a stock is 42.50, whereas on December 31, 2016, the price of the stock is 48.78. Determine the capital gain yield of the stock.

Accepted Answer

A)  13.25% 
B)  14.78% 
C)  15.14% 
D)  16.33% 
E)  17.49% 
A)  13.25% 
B)  14.78% 
C)  15.14% 
D)  16.33% 
E)  17.49%

Question 18

Considering the economic value added (EVA) of a firm, which of the following should increase the firm's value?

Accepted Answer

A)  EVA = 0 
B)  EVA > 0 
C)  EVA  EPS 
E)  P/E ratio > EVA 
A)  EVA = 0 
B)  EVA > 0 
C)  EVA  EPS 
E)  P/E ratio > EVA

Question 19

What action would the management take if it wants to gain more ownership control of the firm?

Accepted Answer

A)  Issue more growth stocks 
B)  Solicit and get stockholders' proxies 
C)  Repay a portion of the loan 
D)  Repurchase shares of common stock 
E)  Pay cumulative dividends to preferred stocks 
A)  Issue more growth stocks 
B)  Solicit and get stockholders' proxies 
C)  Repay a portion of the loan 
D)  Repurchase shares of common stock 
E)  Pay cumulative dividends to preferred stocks

Question 20

Certificates representing ownership in stocks of foreign companies, which are held in a trust bank located in the country the stock is traded are called _____.

Accepted Answer

A)  certificates of ownership 
B)  foreign stock funds 
C)  mutual funds 
D)  American depository receipts 
E)  investment bankers 
A)  certificates of ownership 
B)  foreign stock funds 
C)  mutual funds 
D)  American depository receipts 
E)  investment bankers

The preferred dividend is generally stated as a percentage of the _____.

A firm expects to pay dividends at the end of each of the next four years of $2.00, $1.50, $2.50, and $3.50. If growth is then expected to level off at 8 percent, and if you require a 14 percent rate of return, how much should you be willing to pay for this stock?

American depository receipts (ADRs) are foreign stocks listed on a domestic exchange.

The EVA of a firm is $6.25 million and the firm has 2.78 million outstanding shares. What is the maximum amount of dividend that can be paid to shareholders?

Which of the following securities have the highest priority with regard to earnings and assets of a firm?

A common stock of a firm will have a maturity period of 10 years.

When using the Dividend Discount Model, assuming that growth (g) will remain constant, under which of the following circumstances will the dividend yield be equal to the required return on a common stock (rs)?

The common stockholders have the right to _____.

A protective feature on a preferred stock that requires preferred dividends previously not paid to be disbursed before any common stock dividends can be paid is called _____.

A stock's par value is equal to the market value of the stock on the last day of the fiscal year for a firm.

Stock owned by the organizers of the firm who will have full voting rights is:

The last dividend on Spirex Corporation's common stock was $4.00, and the expected growth rate is 10 percent. If you require a rate of return of 20 percent, what is the highest price you should be willing to pay for this stock?

A firm has an EBIT of $22 million, total invested capital of $74 million, and the average cost of funds of 12%. The firm has a marginal tax rate of 35% and 4.2 million shares of the firm are outstanding. What is the EVA of the firm?

The constant growth Dividend Discount Model (DDM) may be written as _____.

Which of the following provisions will call for the repurchase and retirement of a given percentage of the preferred stock each year?

Which of the following is true about the payment of dividends by a firm?

On January 1, 2016, the price of a stock is 42.50, whereas on December 31, 2016, the price of the stock is 48.78. Determine the capital gain yield of the stock.

Considering the economic value added (EVA) of a firm, which of the following should increase the firm's value?

What action would the management take if it wants to gain more ownership control of the firm?

Certificates representing ownership in stocks of foreign companies, which are held in a trust bank located in the country the stock is traded are called _____.

An Overview of Managerial Finance

Analysis of Financial Statements

The Financial Environment: Markets, Institutions, and Investment Banking

Time Value of Money

The Cost of Money Interest Rates

Bonds Debtcharacteristics and Valuation

Risk and Rates of Return

Capital Budgeting Techniques

Project Cash Flows and Risk

The Cost of Capital

Capital Structure

Distribution of Retained Earnings: Dividends and Stock Repurchases

Managing Short-Term Financing Liabilities

Managing Short-Term Assets

Financial Planning and Control

Filters

Exam 7: Stocks Equity Characteristics and Valuation

The preferred dividend is generally stated as a percentage of the _____.

A firm expects to pay dividends at the end of each of the next four years of $2.00, $1.50, $2.50, and $3.50. If growth is then expected to level off at 8 percent, and if you require a 14 percent rate of return, how much should you be willing to pay for this stock?

American depository receipts (ADRs) are foreign stocks listed on a domestic exchange.

The EVA of a firm is $6.25 million and the firm has 2.78 million outstanding shares. What is the maximum amount of dividend that can be paid to shareholders?

Which of the following securities have the highest priority with regard to earnings and assets of a firm?

A common stock of a firm will have a maturity period of 10 years.

When using the Dividend Discount Model, assuming that growth (g) will remain constant, under which of the following circumstances will the dividend yield be equal to the required return on a common stock (rs)?

The common stockholders have the right to _____.

A protective feature on a preferred stock that requires preferred dividends previously not paid to be disbursed before any common stock dividends can be paid is called _____.

A stock's par value is equal to the market value of the stock on the last day of the fiscal year for a firm.

Stock owned by the organizers of the firm who will have full voting rights is:

The last dividend on Spirex Corporation's common stock was $4.00, and the expected growth rate is 10 percent. If you require a rate of return of 20 percent, what is the highest price you should be willing to pay for this stock?

A firm has an EBIT of $22 million, total invested capital of $74 million, and the average cost of funds of 12%. The firm has a marginal tax rate of 35% and 4.2 million shares of the firm are outstanding. What is the EVA of the firm?

The constant growth Dividend Discount Model (DDM) may be written as _____.

Which of the following provisions will call for the repurchase and retirement of a given percentage of the preferred stock each year?

Which of the following is true about the payment of dividends by a firm?

On January 1, 2016, the price of a stock is 42.50, whereas on December 31, 2016, the price of the stock is 48.78. Determine the capital gain yield of the stock.

Considering the economic value added (EVA) of a firm, which of the following should increase the firm's value?

What action would the management take if it wants to gain more ownership control of the firm?

Certificates representing ownership in stocks of foreign companies, which are held in a trust bank located in the country the stock is traded are called _____.

An Overview of Managerial Finance

Analysis of Financial Statements

The Financial Environment: Markets, Institutions, and Investment Banking

Time Value of Money

The Cost of Money Interest Rates

Bonds Debtcharacteristics and Valuation

Risk and Rates of Return

Capital Budgeting Techniques

Project Cash Flows and Risk

The Cost of Capital

Capital Structure

Distribution of Retained Earnings: Dividends and Stock Repurchases

Managing Short-Term Financing Liabilities

Managing Short-Term Assets

Financial Planning and Control

Filters