Question 1

Which of these factors are most associated with a high PE ratio?

Accepted Answer

A) High growth opportunities and high risk 
B) Low risk and low growth opportunities 
C) Conservative accounting practices and low risk 
D) High risk and low growth opportunities 
E) Aggressive accounting practices and high growth opportunities 
A) High growth opportunities and high risk 
B) Low risk and low growth opportunities 
C) Conservative accounting practices and low risk 
D) High risk and low growth opportunities 
E) Aggressive accounting practices and high growth opportunities

Question 2

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 3

Tyler Industries stock traditionally provides a rate of return of 13.7 percent.The company just paid an annual dividend of $1.21 a share and recently announced it will commence increasing its dividends by 1.6 percent each year.For this stock to return its traditional rate,what should the market price of this stock be?

Accepted Answer

A) $10.00 
B) $11.62 
C) $10.16 
D) $9.12 
E) $8.97 
A) $10.00 
B) $11.62 
C) $10.16 
D) $9.12 
E) $8.97

Question 4

Multiple classes of stock are primarily created to

Accepted Answer

A) allow certain shareholders to retain control of a firm. 
B) replace cash dividends with share repurchases. 
C) allow common stock to have cumulative privileges. 
D) eliminate pre-emptive rights. 
E) ensure all shareholders have equal rights. 
A) allow certain shareholders to retain control of a firm. 
B) replace cash dividends with share repurchases. 
C) allow common stock to have cumulative privileges. 
D) eliminate pre-emptive rights. 
E) ensure all shareholders have equal rights.

Question 5

Dille Inc.pays no dividend at the present time.In Years 2 and 3,the firm will pay annual dividends of $4 a share.After that,it will pay a constant $2 a share dividend indefinitely.What is this stock worth at a required return of 17 percent?

Accepted Answer

A) $12.29 
B) $11.81 
C) $12.77 
D) $12.50 
E) $11.07 
A) $12.29 
B) $11.81 
C) $12.77 
D) $12.50 
E) $11.07

Question 6

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 7

Midtown Enterprises paid its first annual dividend yesterday in the amount of $.26 a share.The company plans to double each annual dividend payment for the next 3 years.After that,it will pay a constant $2.40 per share dividend indefinitely.What is one share of this stock worth today if the market rate of return on similar securities is 14.5 percent?

Accepted Answer

A) $10.79 
B) $11.40 
C) $14.08 
D) $12.93 
E) $13.66 
A) $10.79 
B) $11.40 
C) $14.08 
D) $12.93 
E) $13.66

Question 8

CS Markets has 84,500 shares of stock outstanding.The firm paid out $68,200 in dividends this year and expects their total dividends to increase by 3.5 percent per year.The required return is 12 percent.What is the share price?

Accepted Answer

A) $8.47 
B) $9.83 
C) $6.20 
D) $7.64 
E) $9.50 
A) $8.47 
B) $9.83 
C) $6.20 
D) $7.64 
E) $9.50

Question 9

ALP Inc.has decided to issue preferred stock with an annual dividend of $5 a share.Similar stocks are currently yielding 14 percent.What price should the firm expect to receive for each new share issued?

Accepted Answer

A) $35.71 
B) $33.08 
C) $44.92 
D) $40.71 
E) $38.97 
A) $35.71 
B) $33.08 
C) $44.92 
D) $40.71 
E) $38.97

Question 10

A stock report contains the following information: P/E 21.4,closing price 28.16,dividend 1.10,net chg .06,and an ask of 28.22 × 300.Which one of the following statements is correct given this information?

Accepted Answer

A) The stock price has increased by 6 percent thus far this year. 
B) The closing price on the previous trading day was $28.10. 
C) The earnings per share are approximately $2. 
D) The dividend yield is 21.4 percent. 
E) The bid-ask spread is $.300. 
A) The stock price has increased by 6 percent thus far this year. 
B) The closing price on the previous trading day was $28.10. 
C) The earnings per share are approximately $2. 
D) The dividend yield is 21.4 percent. 
E) The bid-ask spread is $.300.

Question 11

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 12

Hanover Inc.is an all-equity firm with 35,000 shares of stock outstanding.The firm expects sales of $750,000 next year.Sales are expected to grow by 10 percent the following year and then level off to a constant 4 percent growth rate.Net cash flow varies in direct proportion to sales and is currently equal to 17 percent of sales.The required return for this firm is 14 percent.What is the estimated current value of one share of stock?

Accepted Answer

A) $38.35 
B) $36.21 
C) $34.71 
D) $35.20 
E) $36.71 
A) $38.35 
B) $36.21 
C) $34.71 
D) $35.20 
E) $36.71

Question 13

Which one of these represents the portion of a stock's rate of return that is attributable to the growth rate of the dividends?

Accepted Answer

A) Capital gains yield 
B) Real rate of return 
C) Interest yield 
D) Inflation rate 
E) Dividend yield 
A) Capital gains yield 
B) Real rate of return 
C) Interest yield 
D) Inflation rate 
E) Dividend yield

Question 14

NASDAQ has which one of these features?

Accepted Answer

A) Broker system 
B) Trading floor 
C) Multiple market maker system 
D) Designated market maker system 
E) Trading stations called "posts" 
A) Broker system 
B) Trading floor 
C) Multiple market maker system 
D) Designated market maker system 
E) Trading stations called "posts"

Question 15

Hanover Inc.is an all-equity firm with 27,500 shares of stock outstanding.The firm expects sales of $429,000 next year.Sales are expected to grow by 30 percent the following year and then level off to a constant 6 percent growth rate.Net cash flow varies in direct proportion to sales and is currently equal to 21 percent of sales.The required return for this firm is 18 percent.What is the estimated current value of one share of stock?

Accepted Answer

A) $32.85 
B) $36.21 
C) $30.71 
D) $35.20 
E) $31.19 
A) $32.85 
B) $36.21 
C) $30.71 
D) $35.20 
E) $31.19

Question 16

Shares of ABT stock offer an expected total return of 14.6 percent.What is the dividend yield if the dividend increases by 2.8 percent annually?

Accepted Answer

A) 17.40% 
B) 13.20% 
C) 11.80% 
D) 8.74% 
E) 12.80% 
A) 17.40% 
B) 13.20% 
C) 11.80% 
D) 8.74% 
E) 12.80%

Question 17

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 18

Staggered elections

Accepted Answer

A) apply only in situations where multiple classes of stock exist. 
B) primarily benefit minority shareholders. 
C) increase turnover on the board of directors. 
D) are used with straight voting. 
E) help prevent takeovers. 
A) apply only in situations where multiple classes of stock exist. 
B) primarily benefit minority shareholders. 
C) increase turnover on the board of directors. 
D) are used with straight voting. 
E) help prevent takeovers.

Question 19

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 20

Jack owns shares of stock in Boynton Foods and wants to be elected to the company's board of directors.There are 10,000 shares of stock outstanding and each share is granted one vote for each open position on the board.Presently,the company is voting to elect two new directors.Jack can be assured of his election

Accepted Answer

A) if straight voting applies and he owns at least 25 percent of the shares,plus one additional share. 
B) if straight voting applies and he owns at least one-third of the shares,plus one additional share. 
C) if cumulative voting applies and he owns 25 percent of the shares,plus one additional share. 
D) only if cumulative voting applies and he owns the majority of the shares. 
E) if cumulative voting applies and he owns one-third of the shares,plus one additional share. 
A) if straight voting applies and he owns at least 25 percent of the shares,plus one additional share. 
B) if straight voting applies and he owns at least one-third of the shares,plus one additional share. 
C) if cumulative voting applies and he owns 25 percent of the shares,plus one additional share. 
D) only if cumulative voting applies and he owns the majority of the shares. 
E) if cumulative voting applies and he owns one-third of the shares,plus one additional share.

Which of these factors are most associated with a high PE ratio?

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

Multiple classes of stock are primarily created to

Dille Inc.pays no dividend at the present time.In Years 2 and 3,the firm will pay annual dividends of $4 a share.After that,it will pay a constant $2 a share dividend indefinitely.What is this stock worth at a required return of 17 percent?

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

CS Markets has 84,500 shares of stock outstanding.The firm paid out $68,200 in dividends this year and expects their total dividends to increase by 3.5 percent per year.The required return is 12 percent.What is the share price?

ALP Inc.has decided to issue preferred stock with an annual dividend of $5 a share.Similar stocks are currently yielding 14 percent.What price should the firm expect to receive for each new share issued?

A stock report contains the following information: P/E 21.4,closing price 28.16,dividend 1.10,net chg .06,and an ask of 28.22 × 300.Which one of the following statements is correct given this information?

Which one of these represents the portion of a stock's rate of return that is attributable to the growth rate of the dividends?

NASDAQ has which one of these features?

Shares of ABT stock offer an expected total return of 14.6 percent.What is the dividend yield if the dividend increases by 2.8 percent annually?

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?

Staggered elections

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?

Introduction to Corporate Finance

Financial Statements and Cash Flow

Financial Statements Analysis and Financial Models

Discounted Cash Flow Valuation

Interest Rates and Bond Valuation

Net Present Value and Other Investment Rules

Making Capital Investment Decisions

Risk Analysis, Real Options, and Capital Budgeting

Risk and Return: Lessons From Market History

Return and Risk: The Capital Asset Pricing Model Capm

Risk, Cost of Capital, and Valuation

Efficient Capital Markets and Behavioral Challenges

Capital Structure: Basic Concepts

Capital Structure: Limits to the Use of Debt

Dividends and Other Payouts

Options and Corporate Finance

Short-Term Finance and Planning

Raising Capital

International Corporate Finance

Mergers and Acquisitions Web Only

Filters

Exam 6: Stock Valuation

Which of these factors are most associated with a high PE ratio?

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

Multiple classes of stock are primarily created to

Dille Inc.pays no dividend at the present time.In Years 2 and 3,the firm will pay annual dividends of $4 a share.After that,it will pay a constant $2 a share dividend indefinitely.What is this stock worth at a required return of 17 percent?

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

CS Markets has 84,500 shares of stock outstanding.The firm paid out $68,200 in dividends this year and expects their total dividends to increase by 3.5 percent per year.The required return is 12 percent.What is the share price?

ALP Inc.has decided to issue preferred stock with an annual dividend of $5 a share.Similar stocks are currently yielding 14 percent.What price should the firm expect to receive for each new share issued?

A stock report contains the following information: P/E 21.4,closing price 28.16,dividend 1.10,net chg .06,and an ask of 28.22 × 300.Which one of the following statements is correct given this information?

Which one of these represents the portion of a stock's rate of return that is attributable to the growth rate of the dividends?

NASDAQ has which one of these features?

Shares of ABT stock offer an expected total return of 14.6 percent.What is the dividend yield if the dividend increases by 2.8 percent annually?

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?

Staggered elections

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?

Introduction to Corporate Finance

Financial Statements and Cash Flow

Financial Statements Analysis and Financial Models

Discounted Cash Flow Valuation

Interest Rates and Bond Valuation

Net Present Value and Other Investment Rules

Making Capital Investment Decisions

Risk Analysis, Real Options, and Capital Budgeting

Risk and Return: Lessons From Market History

Return and Risk: The Capital Asset Pricing Model Capm

Risk, Cost of Capital, and Valuation

Efficient Capital Markets and Behavioral Challenges

Capital Structure: Basic Concepts

Capital Structure: Limits to the Use of Debt

Dividends and Other Payouts

Options and Corporate Finance

Short-Term Finance and Planning

Raising Capital

International Corporate Finance

Mergers and Acquisitions Web Only

Filters

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