Question 1

A dealer will buy at the ________ price and sell at the ________ price.

Accepted Answer

A) bid;bid 
B) ask;ask 
C) ask;bid 
D) bid;ask 
E) spread;spread 
A) bid;bid 
B) ask;ask 
C) ask;bid 
D) bid;ask 
E) spread;spread

Question 2

A common stock pays an annual dividend of $3.40 and sells for $51.20 a share.What is the total expected rate of return if the dividend yield represents 40 percent of the total return?

Accepted Answer

A) 17.74% 
B) 16.60% 
C) 14.50% 
D) 15.49% 
E) 14.17% 
A) 17.74% 
B) 16.60% 
C) 14.50% 
D) 15.49% 
E) 14.17%

Question 3

Nu-Tek,Inc.is expecting a period of intense growth,so it has decided to reduce its annual dividend by 10 percent a year for the next 3 years.After that,it will maintain a constant dividend of $1.90 a share.Last year,the annual dividend was $2.70 a share.What is the market value of this stock if the required rate of return is 15 percent?

Accepted Answer

A) $13.86 
B) $13.39 
C) $14.88 
D) $14.23 
E) $14.15 
A) $13.86 
B) $13.39 
C) $14.88 
D) $14.23 
E) $14.15

Question 4

A securities market primarily consisting of dealers who buy and sell for their own inventories is generally referred to as a(n)________ market.

Accepted Answer

A) over-the-counter 
B) auction 
C) broker 
D) regional 
E) trading floor 
A) over-the-counter 
B) auction 
C) broker 
D) regional 
E) trading floor

Question 5

General Stores recently announced that it will pay annual dividends of $1.05,$.80,and $.50 over the next 3 years,respectively.The following year,the firm will close and pay a final dividend of $11.30 a share.What is one share of this stock worth today at a discount rate of 16.6 percent?

Accepted Answer

A) $8.24 
B) $7.21 
C) $7.92 
D) $6.72 
E) $6.81 
A) $8.24 
B) $7.21 
C) $7.92 
D) $6.72 
E) $6.81

Question 6

Feltwater Furniture has 134,000 shares of stock outstanding.The firm expects to earn net income of $286,000 next year with annual increases of 4 percent per year thereafter.The firm pays out 70 percent of its net income in dividends.The required return is 16 percent.What is the share price?

Accepted Answer

A) $14.16 
B) $12.45 
C) $13.08 
D) $12.95 
E) $14.63 
A) $14.16 
B) $12.45 
C) $13.08 
D) $12.95 
E) $14.63

Question 7

A stock that pays a constant annual dividend will have a market price that

Accepted Answer

A) increases when the market rate of return increases. 
B) decreases when the market rate of return increases. 
C) decreases over time. 
D) increases over time. 
E) always remains constant. 
A) increases when the market rate of return increases. 
B) decreases when the market rate of return increases. 
C) decreases over time. 
D) increases over time. 
E) always remains constant.

Question 8

Nu Tek's next annual dividend will be $4.26 a share and all later dividends are expected to increase by 4.4 percent annually.What is the rate of return if this stock is currently selling for $48.74 a share?

Accepted Answer

A) 10.76% 
B) 11.98% 
C) 13.14% 
D) 13.67% 
E) 12.87% 
A) 10.76% 
B) 11.98% 
C) 13.14% 
D) 13.67% 
E) 12.87%

Question 9

The Yarn Outlet has net income of $87,400 for the year with 6,500 shares of stock outstanding.Big Knitter is a similar firm with similar growth opportunities that has 8,400 shares of stock outstanding with a market price of $9.34 a share and earnings per share of $.86.What is the estimated value of the Yarn Outlet?

Accepted Answer

A) $1,016,279 
B) $837,040 
C) $1,142,105 
D) $751,620 
E) $949,205 
A) $1,016,279 
B) $837,040 
C) $1,142,105 
D) $751,620 
E) $949,205

Question 10

Last year,Grenville common stock had a rate of return of 15.84 percent,a fixed annual dividend of $2.65 a share,and a dividend yield of 2.7 percent.What was the rate of price appreciation on the stock?

Accepted Answer

A) 13.50% 
B) 12.48% 
C) 12.75% 
D) 13.14% 
E) 13.85% 
A) 13.50% 
B) 12.48% 
C) 12.75% 
D) 13.14% 
E) 13.85%

Question 11

Duncan Street Mills is an all-equity firm with 28,000 shares of stock outstanding.The firm expects sales of $400,000 next year.Sales are expected to grow by 5 percent for the following 2 years and then level off to a constant 3 percent growth rate.Net cash flow varies in direct proportion to sales and is currently equal to 15 percent of sales.The required return for this firm is 16 percent.What is the estimated current value of one share of stock?

Accepted Answer

A) $17.02 
B) $16.21 
C) $16.94 
D) $18.76 
E) $17.34 
A) $17.02 
B) $16.21 
C) $16.94 
D) $18.76 
E) $17.34

Question 12

Winslow Brothers common stock sells for $36.60 a share and pays an annual dividend that increases by 1.8 percent annually.The market rate of return on this stock is 14.7 percent.What is the amount of the last dividend paid?

Accepted Answer

A) $5.29 
B) $4.64 
C) $4.84 
D) $4.56 
E) $5.37 
A) $5.29 
B) $4.64 
C) $4.84 
D) $4.56 
E) $5.37

Question 13

Ernst Electrical increases its annual dividend by 1.8 percent annually.The stock commands a market rate of return of 18 percent and sells for $19.07 a share.What is the expected amount of the next dividend?

Accepted Answer

A) $3.03 
B) $3.07 
C) $3.18 
D) $3.21 
E) $3.09 
A) $3.03 
B) $3.07 
C) $3.18 
D) $3.21 
E) $3.09

Question 14

A market participant who buys and sells securities from inventory is called a

Accepted Answer

A) broker. 
B) trader. 
C) principal. 
D) capitalist. 
E) dealer. 
A) broker. 
B) trader. 
C) principal. 
D) capitalist. 
E) dealer.

Question 15

Lassiter Motors has a debt-equity ratio of 0.45 and total debt of $186,000.The firm's market-to-book ratio is 2.6.The earnings before interest and taxes is $69,200,interest is $26,400,depreciation and amortization total $87,100,and the tax rate is 34 percent.What is the firm's EV to EBITDA ratio if the firm has $31,000 in cash?

Accepted Answer

A) 7)34 
B) 5)47 
C) 6)01 
D) 6)38 
E) 7)87 
A) 7)34 
B) 5)47 
C) 6)01 
D) 6)38 
E) 7)87

Question 16

The total return on a stock is equal to

Accepted Answer

A) Annual dividend / Current stock price. 
B) Capital gains yield - Dividend yield. 
C) Capital gains yield + Dividend yield. 
D) (1 + Dividend yield)× (1 + Inflation rate)- 1. 
E) (1 + Capital gains yield)/ (1 + Dividend yield)- 1. 
A) Annual dividend / Current stock price. 
B) Capital gains yield - Dividend yield. 
C) Capital gains yield + Dividend yield. 
D) (1 + Dividend yield)× (1 + Inflation rate)- 1. 
E) (1 + Capital gains yield)/ (1 + Dividend yield)- 1.

Question 17

The expected dividend yield is equal to

Accepted Answer

A) Dividend yield × Next year's stock price. 
B) Expected cash dividend / Current stock price. 
C) Expected cash dividend / Next year's stock price. 
D) (Retention ratio × Expected earnings)/ Current stock price. 
E) (Dividend payout ratio × Expected earnings)/ Next year's stock price. 
A) Dividend yield × Next year's stock price. 
B) Expected cash dividend / Current stock price. 
C) Expected cash dividend / Next year's stock price. 
D) (Retention ratio × Expected earnings)/ Current stock price. 
E) (Dividend payout ratio × Expected earnings)/ Next year's stock price.

Question 18

The voting procedure whereby shareholders may cast all of their votes for one candidate for the board of directors is called ________ voting.

Accepted Answer

A) democratic 
B) deferred 
C) straight 
D) cumulative 
E) proxy 
A) democratic 
B) deferred 
C) straight 
D) cumulative 
E) proxy

Question 19

A ________ is a form of equity security that has a stated liquidating value.

Accepted Answer

A) debenture 
B) bond 
C) common stock 
D) preferred stock 
E) proxy 
A) debenture 
B) bond 
C) common stock 
D) preferred stock 
E) proxy

Question 20

The owner of preferred stock

Accepted Answer

A) owns shares that generally have a stated liquidating value of $1,000 per share. 
B) has the right to veto the outcome of an election held by the common shareholders. 
C) has the right to collect payment on any unpaid dividends as long as the stock is noncumulative. 
D) is entitled to a distribution of income prior to the common shareholders. 
E) is guaranteed voting rights similar to a common shareholder. 
A) owns shares that generally have a stated liquidating value of $1,000 per share. 
B) has the right to veto the outcome of an election held by the common shareholders. 
C) has the right to collect payment on any unpaid dividends as long as the stock is noncumulative. 
D) is entitled to a distribution of income prior to the common shareholders. 
E) is guaranteed voting rights similar to a common shareholder.

A dealer will buy at the price and sell at the price.

A common stock pays an annual dividend of $3.40 and sells for $51.20 a share.What is the total expected rate of return if the dividend yield represents 40 percent of the total return?

A securities market primarily consisting of dealers who buy and sell for their own inventories is generally referred to as a(n)________ market.

General Stores recently announced that it will pay annual dividends of $1.05,$.80,and $.50 over the next 3 years,respectively.The following year,the firm will close and pay a final dividend of $11.30 a share.What is one share of this stock worth today at a discount rate of 16.6 percent?

Feltwater Furniture has 134,000 shares of stock outstanding.The firm expects to earn net income of $286,000 next year with annual increases of 4 percent per year thereafter.The firm pays out 70 percent of its net income in dividends.The required return is 16 percent.What is the share price?

A stock that pays a constant annual dividend will have a market price that

Nu Tek's next annual dividend will be $4.26 a share and all later dividends are expected to increase by 4.4 percent annually.What is the rate of return if this stock is currently selling for $48.74 a share?

Last year,Grenville common stock had a rate of return of 15.84 percent,a fixed annual dividend of $2.65 a share,and a dividend yield of 2.7 percent.What was the rate of price appreciation on the stock?

Winslow Brothers common stock sells for $36.60 a share and pays an annual dividend that increases by 1.8 percent annually.The market rate of return on this stock is 14.7 percent.What is the amount of the last dividend paid?

Ernst Electrical increases its annual dividend by 1.8 percent annually.The stock commands a market rate of return of 18 percent and sells for $19.07 a share.What is the expected amount of the next dividend?

A market participant who buys and sells securities from inventory is called a

The total return on a stock is equal to

The expected dividend yield is equal to

The voting procedure whereby shareholders may cast all of their votes for one candidate for the board of directors is called ________ voting.

A ________ is a form of equity security that has a stated liquidating value.

The owner of preferred stock

Introduction to Corporate Finance

Financial Statements AMCQ Cash Flow

Financial Statements Analysis Amcq Financial Models

Discounted Cash Flow Valuation

Interest Rates AMCQ Bomcq Valuation

Net Present Value AMCQ Other Investment Rules

Making Capital Investment Decisions

Risk Analysis, Real Options, AMCQ Capital Budgeting

Risk Amcq Return: Lessons From Market History

Return Amcq Risk: the Capital Asset Pricing Model Capm

Risk, cost of Capital, AMCQ Valuation

Efficient Capital Markets Amcq Behavioral Challenges

Capital Structure: Basic Concepts

Capital Structure: Limits to the Use of Debt

Dividemcqs AMCQ Other Payouts

Options Amcq Corporate Finance

Short-Term Finance Amcq Planning

Raising Capital

International Corporate Finance

Mergers Amcq Acquisitions Web Only

Filters

Exam 6: Stock Valuation

A dealer will buy at the ________ price and sell at the ________ price.

A common stock pays an annual dividend of $3.40 and sells for $51.20 a share.What is the total expected rate of return if the dividend yield represents 40 percent of the total return?

A securities market primarily consisting of dealers who buy and sell for their own inventories is generally referred to as a(n)________ market.

General Stores recently announced that it will pay annual dividends of $1.05,$.80,and $.50 over the next 3 years,respectively.The following year,the firm will close and pay a final dividend of $11.30 a share.What is one share of this stock worth today at a discount rate of 16.6 percent?

Feltwater Furniture has 134,000 shares of stock outstanding.The firm expects to earn net income of $286,000 next year with annual increases of 4 percent per year thereafter.The firm pays out 70 percent of its net income in dividends.The required return is 16 percent.What is the share price?

A stock that pays a constant annual dividend will have a market price that

Nu Tek's next annual dividend will be $4.26 a share and all later dividends are expected to increase by 4.4 percent annually.What is the rate of return if this stock is currently selling for $48.74 a share?

Last year,Grenville common stock had a rate of return of 15.84 percent,a fixed annual dividend of $2.65 a share,and a dividend yield of 2.7 percent.What was the rate of price appreciation on the stock?

Winslow Brothers common stock sells for $36.60 a share and pays an annual dividend that increases by 1.8 percent annually.The market rate of return on this stock is 14.7 percent.What is the amount of the last dividend paid?

Ernst Electrical increases its annual dividend by 1.8 percent annually.The stock commands a market rate of return of 18 percent and sells for $19.07 a share.What is the expected amount of the next dividend?

A market participant who buys and sells securities from inventory is called a

The total return on a stock is equal to

The expected dividend yield is equal to

The voting procedure whereby shareholders may cast all of their votes for one candidate for the board of directors is called ________ voting.

A ________ is a form of equity security that has a stated liquidating value.

The owner of preferred stock

Introduction to Corporate Finance

Financial Statements AMCQ Cash Flow

Financial Statements Analysis Amcq Financial Models

Discounted Cash Flow Valuation

Interest Rates AMCQ Bomcq Valuation

Net Present Value AMCQ Other Investment Rules

Making Capital Investment Decisions

Risk Analysis, Real Options, AMCQ Capital Budgeting

Risk Amcq Return: Lessons From Market History

Return Amcq Risk: the Capital Asset Pricing Model Capm

Risk, cost of Capital, AMCQ Valuation

Efficient Capital Markets Amcq Behavioral Challenges

Capital Structure: Basic Concepts

Capital Structure: Limits to the Use of Debt

Dividemcqs AMCQ Other Payouts

Options Amcq Corporate Finance

Short-Term Finance Amcq Planning

Raising Capital

International Corporate Finance

Mergers Amcq Acquisitions Web Only

Filters

A dealer will buy at the price and sell at the price.