Question 1

In a stock market report,the open price represents the

Accepted Answer

A) price a dealer is willing to pay. 
B) price at which a designated market maker will sell. 
C) first trade of the day. 
D) closing price on the previous trading day. 
E) current bid price. 
A) price a dealer is willing to pay. 
B) price at which a designated market maker will sell. 
C) first trade of the day. 
D) closing price on the previous trading day. 
E) current bid price.

Question 2

The voting procedure where a shareholder grants authority to another individual to vote his/her shares is called ________ voting.

Accepted Answer

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

Question 3

Corporate dividends

Accepted Answer

A) are a source of tax-free income for individual investors. 
B) reduce the taxable income of the payer. 
C) are only 70 percent taxable to corporate shareholders. 
D) are paid out of pretax income and thus are taxed at the personal level. 
E) are taxed at the personal level even though they are paid from after-tax income. 
A) are a source of tax-free income for individual investors. 
B) reduce the taxable income of the payer. 
C) are only 70 percent taxable to corporate shareholders. 
D) are paid out of pretax income and thus are taxed at the personal level. 
E) are taxed at the personal level even though they are paid from after-tax income.

Question 4

The ELL common stock pays an annual dividend of $2.23 a share and is committed to maintaining a constant dividend.How much are you willing to pay for one share of this stock if your required return is 16 percent?

Accepted Answer

A) $14.56 
B) $14.67 
C) $13.94 
D) $13.88 
E) $14.04 
A) $14.56 
B) $14.67 
C) $13.94 
D) $13.88 
E) $14.04

Question 5

Wilton's Market just announced its next annual dividend will be $1.62 a share with future dividends increasing by 2.2 percent annually.How much will one share of this stock be worth 6 years from now if the required return is 12.5 percent?

Accepted Answer

A) $16.76 
B) $17.92 
C) $18.14 
D) $18.32 
E) $15.79 
A) $16.76 
B) $17.92 
C) $18.14 
D) $18.32 
E) $15.79

Question 6

The free cash flow model,as compared to other models,tends to be most helpful when valuing a share of stock in a:

Accepted Answer

A) firm that pays dividends that increase at a constant rate of growth. 
B) firm having similar growth opportunities as other firms. 
C) non-dividend-paying firm that has external financing needs. 
D) firm that plans to lower its dividend growth rate in the near future. 
E) firm that pays a fixed annual dividend. 
A) firm that pays dividends that increase at a constant rate of growth. 
B) firm having similar growth opportunities as other firms. 
C) non-dividend-paying firm that has external financing needs. 
D) firm that plans to lower its dividend growth rate in the near future. 
E) firm that pays a fixed annual dividend.

Question 7

Denver Machinery has 140,800 shares of stock outstanding,and each share receives one vote for each open seat on the board of directors.There are five open seats at this time.How many shares must you control to guarantee your personal election to the board if the firm uses cumulative voting?

Accepted Answer

A) 17,001 shares 
B) 28,001 shares 
C) 28,160 shares 
D) 23,468 shares 
E) 19,251 shares 
A) 17,001 shares 
B) 28,001 shares 
C) 28,160 shares 
D) 23,468 shares 
E) 19,251 shares

Question 8

Janlea Co.had total net earnings of $158,600 this past year and paid out 60 percent of those earnings in dividends.There are 84,000 shares of stock outstanding at a current market price of $18.43 a share.If the dividend growth rate is 2.8 percent,what is the required rate of return?

Accepted Answer

A) 14.27% 
B) 12.56% 
C) 8.95% 
D) 10.40% 
E) 11.60% 
A) 14.27% 
B) 12.56% 
C) 8.95% 
D) 10.40% 
E) 11.60%

Question 9

Lew,an individual investor,sold 100 shares of Global Tech stock on Monday.Janice,another individual investor,purchased those shares but never met Lew.You know for certain that this trade occurred in which market?

Accepted Answer

A) Primary market 
B) Dealer market 
C) NASDAQ 
D) Secondary market 
E) NYSE 
A) Primary market 
B) Dealer market 
C) NASDAQ 
D) Secondary market 
E) NYSE

Question 10

Duncan Street Mills is an all-equity firm with 32,000 shares of stock outstanding.The firm expects sales of $520,000 next year.Sales are expected to grow by 8 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 16 percent of sales.The required return is 17 percent.What is the estimated current value of one share of stock?

Accepted Answer

A) $20.10 
B) $22.03 
C) $18.94 
D) $19.76 
E) $18.01 
A) $20.10 
B) $22.03 
C) $18.94 
D) $19.76 
E) $18.01

Question 11

The rate at which a stock's price is expected to appreciate (or depreciate)is called the ________ yield.

Accepted Answer

A) current 
B) capital gains 
C) dividend 
D) total 
E) earnings 
A) current 
B) capital gains 
C) dividend 
D) total 
E) earnings

Question 12

JJ Companies will pay an annual dividend of $4.20 a share on its common stock next year.Last week,the company paid a dividend of $4.00 a share.The company adheres to a constant rate of growth dividend policy.What will one share of this stock be worth 8 years from now if the applicable discount rate is 14 percent?

Accepted Answer

A) $68.95 
B) $81.44 
C) $74.21 
D) $71.16 
E) $77.09 
A) $68.95 
B) $81.44 
C) $74.21 
D) $71.16 
E) $77.09

Question 13

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 14

Differential growth refers to the stock of a firm that increases its dividend by

Accepted Answer

A) three or more percent per year. 
B) a stated percent each year. 
C) a rate that is expected to be sustainable indefinitely. 
D) an amount in excess of $.25 per year. 
E) varying rates over a period of time. 
A) three or more percent per year. 
B) a stated percent each year. 
C) a rate that is expected to be sustainable indefinitely. 
D) an amount in excess of $.25 per year. 
E) varying rates over a period of time.

Question 15

Blasco just paid an annual dividend of $1.63 a share.What is one share of this stock worth to you if the dividends increase by 3 percent annually and you require a rate of return of 14 percent?

Accepted Answer

A) $12.40 
B) $11.99 
C) $10.54 
D) $15.26 
E) $11.64 
A) $12.40 
B) $11.99 
C) $10.54 
D) $15.26 
E) $11.64

Question 16

Last week,Railway Cabooses paid its annual dividend of $1.12 a share.The company has been reducing its dividends by 4 percent each year.What is one share of stock worth at a required return of 17 percent?

Accepted Answer

A) $4.06 
B) $5.12 
C) $6.80 
D) $8.27 
E) $7.90 
A) $4.06 
B) $5.12 
C) $6.80 
D) $8.27 
E) $7.90

Question 17

An agent who arranges security transactions among investors without maintaining an inventory is called a

Accepted Answer

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

Question 18

Which one of the following transactions occurs in the primary market?

Accepted Answer

A) Repurchase of GHI stock from Tim by GHI 
B) Tax-free gift of DEF stock to Heather by Jennifer 
C) Sale of ABC stock by Fred Jones to Mary Smith 
D) Initial sale of JKL stock by JKL to Jamie 
E) Transfer of MNO stock from Tom to his son,Jon 
A) Repurchase of GHI stock from Tim by GHI 
B) Tax-free gift of DEF stock to Heather by Jennifer 
C) Sale of ABC stock by Fred Jones to Mary Smith 
D) Initial sale of JKL stock by JKL to Jamie 
E) Transfer of MNO stock from Tom to his son,Jon

Question 19

New Tours last annual dividend was $2 a share.The company plans to lower the dividend by $.30 each year for the next 3 years.In Year 5,it will pay a final liquidating dividend of $17 a share.If the required return is 22 percent,what is the current per share value of this stock?

Accepted Answer

A) $9.23 
B) $13.08 
C) $10.61 
D) $14.13 
E) $8.86 
A) $9.23 
B) $13.08 
C) $10.61 
D) $14.13 
E) $8.86

Question 20

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

In a stock market report,the open price represents the

The voting procedure where a shareholder grants authority to another individual to vote his/her shares is called ________ voting.

Corporate dividends

The ELL common stock pays an annual dividend of $2.23 a share and is committed to maintaining a constant dividend.How much are you willing to pay for one share of this stock if your required return is 16 percent?

Wilton's Market just announced its next annual dividend will be $1.62 a share with future dividends increasing by 2.2 percent annually.How much will one share of this stock be worth 6 years from now if the required return is 12.5 percent?

The free cash flow model,as compared to other models,tends to be most helpful when valuing a share of stock in a:

Denver Machinery has 140,800 shares of stock outstanding,and each share receives one vote for each open seat on the board of directors.There are five open seats at this time.How many shares must you control to guarantee your personal election to the board if the firm uses cumulative voting?

Janlea Co.had total net earnings of $158,600 this past year and paid out 60 percent of those earnings in dividends.There are 84,000 shares of stock outstanding at a current market price of $18.43 a share.If the dividend growth rate is 2.8 percent,what is the required rate of return?

Lew,an individual investor,sold 100 shares of Global Tech stock on Monday.Janice,another individual investor,purchased those shares but never met Lew.You know for certain that this trade occurred in which market?

The rate at which a stock's price is expected to appreciate (or depreciate)is called the ________ yield.

Differential growth refers to the stock of a firm that increases its dividend by

Blasco just paid an annual dividend of $1.63 a share.What is one share of this stock worth to you if the dividends increase by 3 percent annually and you require a rate of return of 14 percent?

Last week,Railway Cabooses paid its annual dividend of $1.12 a share.The company has been reducing its dividends by 4 percent each year.What is one share of stock worth at a required return of 17 percent?

An agent who arranges security transactions among investors without maintaining an inventory is called a

Which one of the following transactions occurs in the primary market?

New Tours last annual dividend was $2 a share.The company plans to lower the dividend by $.30 each year for the next 3 years.In Year 5,it will pay a final liquidating dividend of $17 a share.If the required return is 22 percent,what is the current per share value of this stock?

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

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

In a stock market report,the open price represents the

The voting procedure where a shareholder grants authority to another individual to vote his/her shares is called ________ voting.

Corporate dividends

The ELL common stock pays an annual dividend of $2.23 a share and is committed to maintaining a constant dividend.How much are you willing to pay for one share of this stock if your required return is 16 percent?

Wilton's Market just announced its next annual dividend will be $1.62 a share with future dividends increasing by 2.2 percent annually.How much will one share of this stock be worth 6 years from now if the required return is 12.5 percent?

The free cash flow model,as compared to other models,tends to be most helpful when valuing a share of stock in a:

Denver Machinery has 140,800 shares of stock outstanding,and each share receives one vote for each open seat on the board of directors.There are five open seats at this time.How many shares must you control to guarantee your personal election to the board if the firm uses cumulative voting?

Janlea Co.had total net earnings of $158,600 this past year and paid out 60 percent of those earnings in dividends.There are 84,000 shares of stock outstanding at a current market price of $18.43 a share.If the dividend growth rate is 2.8 percent,what is the required rate of return?

Lew,an individual investor,sold 100 shares of Global Tech stock on Monday.Janice,another individual investor,purchased those shares but never met Lew.You know for certain that this trade occurred in which market?

The rate at which a stock's price is expected to appreciate (or depreciate)is called the ________ yield.

Differential growth refers to the stock of a firm that increases its dividend by

Blasco just paid an annual dividend of $1.63 a share.What is one share of this stock worth to you if the dividends increase by 3 percent annually and you require a rate of return of 14 percent?

Last week,Railway Cabooses paid its annual dividend of $1.12 a share.The company has been reducing its dividends by 4 percent each year.What is one share of stock worth at a required return of 17 percent?

An agent who arranges security transactions among investors without maintaining an inventory is called a

Which one of the following transactions occurs in the primary market?

New Tours last annual dividend was $2 a share.The company plans to lower the dividend by $.30 each year for the next 3 years.In Year 5,it will pay a final liquidating dividend of $17 a share.If the required return is 22 percent,what is the current per share value of this stock?

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

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