Exam 6: Common Stock Valuation

Main Street Antiques is planning on paying an annual dividend of $2.20 per share next year.The company is slowly downsizing and is decreasing its dividend by 3 percent annually.What is the current value of this stock at a discount rate of 8 percent?

The sustainable growth rate is equal to:

The last dividend paid by New Technologies was an annual dividend of $1.40 a share.Dividends for the next 3 years will be increased at an annual rate of 8 percent.After that,dividends are expected to increase by 3 percent each year.The discount rate is 16 percent.What is the current value of this stock?

Standard,Inc.reported net income of $35 million for last year.Depreciation expense totaled $20 million and capital expenditures came to $7 million.Free cash flow is expected to grow at a rate of 6% for the foreseeable future.Stuart faces a 40% tax rate and has a 0.40 debt to equity ratio with $120 million (market value)in debt outstanding.Standard's equity beta is 1.25,the risk-free rate is currently 5% and the market risk premium is estimated to be 7.5%.What is the current value (in millions)of Standard's equity?

Lansing Corporation reported net income of $65 million for last year.Depreciation expense totaled $15 million and capital expenditures came to $6 million.Free cash flow is expected to grow at a rate of 4.5% for the foreseeable future.Lansing faces a 40% tax rate and has a 0.35 debt to equity ratio with $260 million (market value)in debt outstanding.Lansing's equity beta is 1.35,the risk-free rate is currently 5% and the market risk premium is estimated to be 6.5%.What is the current total value of Lansing's equity (in millions)?

L.B.Jay has net income of $38,000,total assets of $437,000,total liabilities of $208,000,and a price-book ratio of 3.8.There are 60,000 shares of stock outstanding.What is the firm's price-earnings ratio?

McKenzie,Inc.reported net income of $8.5 million for last year.Depreciation expense totaled $5 million and capital expenditures came to $2 million.Free cash flow is expected to grow at a rate of 2.5% for the foreseeable future.McKenzie faces a 40% tax rate and has a 0.50 debt to equity ratio with $20 million (market value)in debt outstanding.McKenzie's equity beta is 1.4,the risk- free rate is currently 5% and the market risk premium is estimated to be 7.5%.McKenzie has 10 million shares of common stock outstanding.What is the current value of a share of McKenzie stock?

Growth stocks are frequently described as having which one of the following characteristics?

Georgia Nursery is a relatively young firm which just paid its first annual dividend of $0.50 a share.Management projects dividend increases of 15 percent per year for five years followed by a constant growth rate of 5.0 percent annually.What is this stock worth today if the applicable discount rate is 10 percent?

Currently,Southern Foods has sales of $1.32 million,net profit of $521,400,and 125,000 shares of stock outstanding.The sales and net profit are each expected to grow by 6 percent annually.The historical P/S ratio is 7.8.What is the expected price of this stock one year from now?

Which one of the following will increase the current residual income of a firm?

Leslie Apparel has a current book value per share of $5.15 and current earnings per share of $1.13.The required return is 14 percent and the expected earnings growth rate is 4.5 percent.What is one share of this stock worth today?

What is the accounting relationship in which earnings per share minus dividends equal the change in book value per share called?

Toys Galore has historically had a P/E ratio of 18.5.This ratio is considered a good estimate of the future ratio.The firm currently has EPS of $2.10.These earnings are expected to increase by 5.0 percent next year.What is the expected price of this stock one year from now?

The price-book ratio is computed as the market value per share divided by the per share book value of:

CB Industries stock is valued at $16.80 a share.The firm pays annual dividends at an increasing rate of 4.5 percent annually.Next year's dividend will be $1.90 per share.What is the required return on this stock?

The model used to value a stock that pays a dividend which increases at a constant rate forever is referred to as which one of the following? Assume the growth rate is less than the discount rate.

Which one of the following statements related to the price-earnings (P/E)ratio is correct?

Roy's Markets has net income of $164,000.The firm has 200,000 shares of common stock outstanding.The dividend for this year is $0.61 per share.What is the retention ratio?

Oak Supply has earnings per share of $1.22.The firm has $840,000 in equity and 60,000 shares of stock outstanding.What is the return on equity?