Exam 6: Common Stock Valuation

The Back Room just paid an annual dividend of $1.50 a share.The firm expects to pay dividends forever and to increase the dividend by 4.5 percent annually.What is the expected value of this stock six years from now if the discount rate is 12 percent?

Wilkinson and Daughters has net income of $415,400,total assets of $2.2 million,and total liabilities of $1.08 million.The company paid $270,000 in dividends.What is the firm's sustainable rate of growth?

How is a sustainable dividend growth rate defined?

The Retail Box has a historical P/CF ratio of 21.5.The current CFPS is $1.42 and the projected CFPS growth rate is 5.6 percent.The current EPS is $1.02.What is the expected price of this stock one year from now?

The retention ratio is the:

Blue Water Tours has paid annual dividends of $2.10,$2.12,$2.15,$2.15,and $2.22 over the past 5 years,respectively.What is the arithmetic average growth rate for these dividends?

Alpha Wood Interiors announced today that it is going out of business.As of today,no more regular dividends will be paid.The firm will,however,pay two liquidating dividends.The first will be paid one year from now in the amount of $15 a share.The second and final payment will be paid two years from now at an estimated $40 a share.What is the value of this stock today at a discount rate of 16 percent?

The Watermelon Patch has a retention ratio of 0.75,dividends of $50,000,and total equity of $3.5 million.What is the firm's sustainable rate of growth?

Hypo Tech expects its net income to grow at 20 percent a year for the next two years and then taper off to a constant 5 percent annual rate of growth.The firm maintains a constant dividend payout ratio.Which one of the following models is best suited for computing the current value of this firm's stock?

You would like to know the value of a firm's equity today in relation to the cost of that equity.Which one of the following ratios will provide you with this information?

Detroit Imports has a dividend payout ratio of 40 percent and annual dividends of $2.60 per share.What is the retention ratio?

Beach & Company reported net income of $40 million for last year.Depreciation expense totaled $18 million and capital expenditures came to $8 million.Free cash flow is expected to grow at a rate of 5% for the foreseeable future.Beach faces a 40% tax rate and has a 0.50 debt to equity ratio with $200 million (market value)in debt outstanding.Beach's equity beta is 1.25,the risk-free rate is currently 4.5% and the market risk premium is estimated to be 8%.What is the current total value of Beach & Company (in millions)?

Blue Water Tours just paid an annual dividend of $0.80 a share.The firm has a policy of increasing the dividend by 3.5 percent annually.What is the current value of this stock at a discount rate of 11.5 percent?

You are considering buying shares of stock in the Steel Mill.The forecast for the firm is steady growth over the next decade.The firm just paid its annual dividend of $1.42 per share and has plans to increase that amount by 4 percent annually indefinitely.You require a 12.5 percent return on this type of security.What is your estimate of the value of this stock ten years from now?

Which one of the following is correct concerning the two-stage dividend growth model?

Bait 'n Tackle started paying dividends 4 years ago.The annual dividends thus far have been $0.50,$0.55,$0.60,and $0.65,respectively.What is the arithmetic average dividend growth rate?

A stock sells for $12.36 a share and has a required return of 9 percent.Dividends are paid annually and increase at a constant 3 percent per year.What is the amount of the last dividend paid?

Wilson's Furniture is experiencing good growth so has decided to commence paying dividends starting next year.The first dividend will be $0.50 a share with annual increases of 4 percent in the dividend amount.The discount rate is 10 percent.What will the value of this stock be four years from now?

Dennison Mfg.pays annual dividends.For the past six years,the firm has paid dividends of $1.10,$1.15 $1.20,$1.25,$1.30,and $1.35,respectively.What is the geometric average dividend growth rate for this time period?

Canadian Adventures has earnings per share of $2.86 and dividends per share of $1.80.The total equity of the firm is $750,000.There are 38,000 shares of stock outstanding.What is the sustainable rate of growth?