Question 1

How can a firm effectively incorporate a maturity provision within a preferred stock issue?

Accepted Answer

A) By including a call provision 
B) By including a cumulative dividends provision 
C) By including a preemptive right 
D) By including a participating provision 
E) By including a voting provision 
A) By including a call provision 
B) By including a cumulative dividends provision 
C) By including a preemptive right 
D) By including a participating provision 
E) By including a voting provision

Question 2

If a German company sells its stock in the United States, it is termed as a(n) _____.

Accepted Answer

A) founders' stock 
B) Yankee stock 
C) income stock 
D) growth stock 
E) Euro stock 
A) founders' stock 
B) Yankee stock 
C) income stock 
D) growth stock 
E) Euro stock

Question 3

Common shareholders can exert control of the management of the firm by:

Accepted Answer

A) requiring the firm to unionize. 
B) directly replacing management with themselves. 
C) buying shares in an initial public offering (IPO) at a discounted price. 
D) electing board members who can replace the management. 
E) buying shares in a second firm at a substantially reduced price. 
A) requiring the firm to unionize. 
B) directly replacing management with themselves. 
C) buying shares in an initial public offering (IPO) at a discounted price. 
D) electing board members who can replace the management. 
E) buying shares in a second firm at a substantially reduced price.

Question 4

Which of the following is a feature of a preferred stock?

Accepted Answer

A) Preferred stockholders have priority over debt holders, with regard to the distribution of earnings and assets of the firm. 
B) Preferred stockholders can elect the members of the board of directors and also vote on corporate issues. 
C) The firm generally pays different amounts of preferred stock dividends each year. 
D) Preferred stockholders have the right to receive shares of any new common stock issues in proportion to their current ownership holdings. 
E) Preferred stockholders have a higher priority claim to distributions made by the firm than common stockholders. 
A) Preferred stockholders have priority over debt holders, with regard to the distribution of earnings and assets of the firm. 
B) Preferred stockholders can elect the members of the board of directors and also vote on corporate issues. 
C) The firm generally pays different amounts of preferred stock dividends each year. 
D) Preferred stockholders have the right to receive shares of any new common stock issues in proportion to their current ownership holdings. 
E) Preferred stockholders have a higher priority claim to distributions made by the firm than common stockholders.

Question 5

Which of the following formulas calculates price-earnings (P/E) ratio?

Accepted Answer

A) Market price per share ÷ Book value per share 
B) Earnings available to common stockholders (EA
C)  ÷ Number of shares 
C) Common dividends ÷ Number of shares 
D) Market price per share ÷ Earnings per share 
E) Average cost of funds × Invested capital 
A) Market price per share ÷ Book value per share 
B) Earnings available to common stockholders (EA
C)  ÷ Number of shares 
C) Common dividends ÷ Number of shares 
D) Market price per share ÷ Earnings per share 
E) Average cost of funds × Invested capital

Question 6

The constant growth dividend discount model (DDM) may be written as _____.

Accepted Answer

A)  $\hat { \mathrm { r } } _ { 0 } = \mathrm { \hat D } _ { 0 } / \left( \mathrm { P } _ { 0 } + \mathrm { g } \right)$ 
B)  $\hat { \mathrm { P } } _ { 0 } = \hat { \mathrm { D } } _ { 0 } / \left( \mathrm { r } _ { \mathrm { s } } + \mathrm { g } \right)$ 
C) $\hat { \mathrm { P } } _ { 0 } = \widehat { \mathrm { D} } _ { 0 } / \left( \mathrm { r } _ { s } - \mathrm { g } \right)$ 
D)  $\hat { \mathrm { P } } _ { 0 } = \hat { \mathrm { D } } _ { 1 } / \left( \mathrm { r } _ { \mathrm { s } } - \mathrm { g } \right)$ 
E)  $\hat { \mathrm { r } } _ { 0 } = \hat { \mathrm { D } } _ { 0 } / \left( \mathrm { P } _ { 0 } - \mathrm { g } \right)$ 
A)  $\hat { \mathrm { r } } _ { 0 } = \mathrm { \hat D } _ { 0 } / \left( \mathrm { P } _ { 0 } + \mathrm { g } \right)$ 
B)  $\hat { \mathrm { P } } _ { 0 } = \hat { \mathrm { D } } _ { 0 } / \left( \mathrm { r } _ { \mathrm { s } } + \mathrm { g } \right)$ 
C) $\hat { \mathrm { P } } _ { 0 } = \widehat { \mathrm { D} } _ { 0 } / \left( \mathrm { r } _ { s } - \mathrm { g } \right)$ 
D)  $\hat { \mathrm { P } } _ { 0 } = \hat { \mathrm { D } } _ { 1 } / \left( \mathrm { r } _ { \mathrm { s } } - \mathrm { g } \right)$ 
E)  $\hat { \mathrm { r } } _ { 0 } = \hat { \mathrm { D } } _ { 0 } / \left( \mathrm { P } _ { 0 } - \mathrm { g } \right)$

Question 7

A common stock's par value is always equal to the market value of the stock on the last day of the fiscal year in which the stock is issued.

Accepted Answer

A) True 
 B)False

Question 8

The economic value added (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 without threatening the firm's current value?

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 9

You are trying to determine the appropriate price to pay for a share of common stock. If you purchase this stock, you plan to hold it for 1 year. At the end of the year you expect to receive a dividend of $5.50 and to sell the stock for $154. The appropriate rate of return for this stock is 16 percent. What should the current price of this stock be?

Accepted Answer

A) $150.22 
B) $162.18 
C) $137.50 
D) $98.25 
E) $175.83 
A) $150.22 
B) $162.18 
C) $137.50 
D) $98.25 
E) $175.83

Question 10

The price-earnings (P/E) ratio gives an indication of _____.

Accepted Answer

A) a firm's debt position 
B) a stock's dividend yield 
C) the payback period of a stock 
D) the par value of a stock 
E) the maturity value of a stock 
A) a firm's debt position 
B) a stock's dividend yield 
C) the payback period of a stock 
D) the par value of a stock 
E) the maturity value of a stock

Question 11

What is another name for the par value of a preferred stock?

Accepted Answer

A) Liquidation value 
B) Interest 
C) Preference value 
D) Cumulative value 
E) Hybrid value 
A) Liquidation value 
B) Interest 
C) Preference value 
D) Cumulative value 
E) Hybrid value

Question 12

Which of the following is true about a growth stock?

Accepted Answer

A) It pays a fixed amount of dividends every year. 
B) It has voting rights and generally pays a fixed amount of interest each year until maturity. 
C) It pays large and relatively constant dividends each year. 
D) It pays cumulative dividends at the time of maturity. 
E) It generally pays little or no dividends because the firm retains most of its earnings to fund developmental opportunities. 
A) It pays a fixed amount of dividends every year. 
B) It has voting rights and generally pays a fixed amount of interest each year until maturity. 
C) It pays large and relatively constant dividends each year. 
D) It pays cumulative dividends at the time of maturity. 
E) It generally pays little or no dividends because the firm retains most of its earnings to fund developmental opportunities.

How can a firm effectively incorporate a maturity provision within a preferred stock issue?

If a German company sells its stock in the United States, it is termed as a(n) _____.

Common shareholders can exert control of the management of the firm by:

Which of the following is a feature of a preferred stock?

Which of the following formulas calculates price-earnings (P/E) ratio?

The constant growth dividend discount model (DDM) may be written as _____.

A common stock's par value is always equal to the market value of the stock on the last day of the fiscal year in which the stock is issued.

The economic value added (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 without threatening the firm's current value?

The price-earnings (P/E) ratio gives an indication of _____.

What is another name for the par value of a preferred stock?

Which of the following is true about a growth stock?

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 Debt Characteristics 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

How can a firm effectively incorporate a maturity provision within a preferred stock issue?

If a German company sells its stock in the United States, it is termed as a(n) _____.

Common shareholders can exert control of the management of the firm by:

Which of the following is a feature of a preferred stock?

Which of the following formulas calculates price-earnings (P/E) ratio?

The constant growth dividend discount model (DDM) may be written as _____.

A common stock's par value is always equal to the market value of the stock on the last day of the fiscal year in which the stock is issued.

The economic value added (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 without threatening the firm's current value?

The price-earnings (P/E) ratio gives an indication of _____.

What is another name for the par value of a preferred stock?

Which of the following is true about a growth stock?

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 Debt Characteristics 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