Question 1

A firm's current stock price divided by the firm's revenue per share is referred to as which one of the following ratios?

Accepted Answer

A)  price-earnings 
B)  price-book 
C)  price-income 
D)  price-sales 
E)  price-cash flow 
A)  price-earnings 
B)  price-book 
C)  price-income 
D)  price-sales 
E)  price-cash flow

Question 2

Southern Foods just paid an annual dividend of $1.10 a share.Management estimates the dividend will increase by 10 percent a year for the next four years.After that,the annual dividend growth rate is estimated at 3.2 percent.The required rate of return is 12 percent.What is the value of this stock today?

Accepted Answer

A)  $12.55 
B)  $13.00 
C)  $14.54 
D)  $15.81 
E)  $16.21 
A)  $12.55 
B)  $13.00 
C)  $14.54 
D)  $15.81 
E)  $16.21

Question 3

Which one of the following terms is used to identify the evaluation method that determines the value of a stock by reviewing a firm's financial statement in conjunction with other financial and economic information?

Accepted Answer

A)  technical analysis 
B)  conceptual analysis 
C)  prediction valuation 
D)  fundamental analysis 
E)  discounted valuation 
A)  technical analysis 
B)  conceptual analysis 
C)  prediction valuation 
D)  fundamental analysis 
E)  discounted valuation

Question 4

The model used to value the stock of a firm which has a short-term growth rate that varies from its long-term growth rate is called the ________ dividend growth model.

Accepted Answer

A)  flexible 
B)  increasing 
C)  two-stage 
D)  stepped up 
E)  geometric 
A)  flexible 
B)  increasing 
C)  two-stage 
D)  stepped up 
E)  geometric

Question 5

The price-sales ratio helps measure the ability of a firm to generate:

Accepted Answer

A)  net profits. 
B)  quality cash flows. 
C)  higher earnings per share. 
D)  higher cash flow per share. 
E)  revenue growth. 
A)  net profits. 
B)  quality cash flows. 
C)  higher earnings per share. 
D)  higher cash flow per share. 
E)  revenue growth.

Question 6

BP Industries stock is valued at $11.50 a share.The firm pays annual dividends at an increasing rate of 3.0 percent annually.Next year's dividend will be $1.15 per share.What is the required return on this stock?

Accepted Answer

A)  10.00 percent 
B)  11.50 percent 
C)  12.60 percent 
D)  13.00 percent 
E)  14.80 percent 
A)  10.00 percent 
B)  11.50 percent 
C)  12.60 percent 
D)  13.00 percent 
E)  14.80 percent

Question 7

Quality Home Made Ice Cream has plans to pay decreasing annual dividends of $1.60,$1.50,and $1.35 over the next three years,respectively.After that,the firm will increase the dividend by 5 percent each year.What is the value of this stock today at a discount rate of 11 percent?

Accepted Answer

A)  $19.26 
B)  $19.54 
C)  $19.69 
D)  $19.93 
E)  $20.92 
A)  $19.26 
B)  $19.54 
C)  $19.69 
D)  $19.93 
E)  $20.92

Question 8

The arithmetic average dividend growth rate is:

Accepted Answer

A)  the compounded rate of growth over a specified time period. 
B)  easier to compute than the geometric average dividend growth rate. 
C)  the summation of the annual dividend growth rates. 
D)  generally preferred over the geometric average growth rate by most financial analysts. 
E)  generally larger than the geometric average growth rate when the annual growth rates are positive. 
A)  the compounded rate of growth over a specified time period. 
B)  easier to compute than the geometric average dividend growth rate. 
C)  the summation of the annual dividend growth rates. 
D)  generally preferred over the geometric average growth rate by most financial analysts. 
E)  generally larger than the geometric average growth rate when the annual growth rates are positive.

Question 9

Precision Engineering recently announced that its next annual dividend will be $1.20 per share with later dividends increasing by 2.5 percent annually.What is the current value of this stock to you if you require a 12 percent rate of return?

Accepted Answer

A)  $12.63 
B)  $12.95 
C)  $13.05 
D)  $13.37 
E)  $13.72 
A)  $12.63 
B)  $12.95 
C)  $13.05 
D)  $13.37 
E)  $13.72

Question 10

The constant perpetual growth model assumes the:

Accepted Answer

A)  dividends are paid for a stated number of years only. 
B)  net income is all paid out in dividends. 
C)  growth rate is less than the discount rate. 
D)  dividends are constant in amount. 
E)  discount rate increases at a constant rate. 
A)  dividends are paid for a stated number of years only. 
B)  net income is all paid out in dividends. 
C)  growth rate is less than the discount rate. 
D)  dividends are constant in amount. 
E)  discount rate increases at a constant rate.

Question 11

The Boston House increases its dividend each year.The next annual dividend is expected to be $2.25 a share.Future dividends will increase by 5.0 percent annually.What is the current value of this stock if the discount rate is 13 percent?

Accepted Answer

A)  $28.91 
B)  $28.13 
C)  $28.78 
D)  $29.00 
E)  $29.17 
A)  $28.91 
B)  $28.13 
C)  $28.78 
D)  $29.00 
E)  $29.17

A firm's current stock price divided by the firm's revenue per share is referred to as which one of the following ratios?

Which one of the following terms is used to identify the evaluation method that determines the value of a stock by reviewing a firm's financial statement in conjunction with other financial and economic information?

The model used to value the stock of a firm which has a short-term growth rate that varies from its long-term growth rate is called the ________ dividend growth model.

The price-sales ratio helps measure the ability of a firm to generate:

BP Industries stock is valued at $11.50 a share.The firm pays annual dividends at an increasing rate of 3.0 percent annually.Next year's dividend will be $1.15 per share.What is the required return on this stock?

Quality Home Made Ice Cream has plans to pay decreasing annual dividends of $1.60,$1.50,and $1.35 over the next three years,respectively.After that,the firm will increase the dividend by 5 percent each year.What is the value of this stock today at a discount rate of 11 percent?

The arithmetic average dividend growth rate is:

Precision Engineering recently announced that its next annual dividend will be $1.20 per share with later dividends increasing by 2.5 percent annually.What is the current value of this stock to you if you require a 12 percent rate of return?

The constant perpetual growth model assumes the:

The Boston House increases its dividend each year.The next annual dividend is expected to be $2.25 a share.Future dividends will increase by 5.0 percent annually.What is the current value of this stock if the discount rate is 13 percent?

A Brief History of Risk and Return

The Investment Process

Overview of Security Types

Mutual Funds and Other Investment Companies

The Stock Market

Stock Price Behavior and Market Efficiency

Behavioral Finance and the Psychology of Investing

Interest Rates

Bond Prices and Yields

Diversification and Risky Asset Allocation

Return,Risk,and the Security Market Line

Performance Evaluation and Risk Management

Futures Contracts

Stock Options

Option Valuation

Projecting Cash Flow and Earnings

Corporate and Government Bonds

Global Economic Activity and Industry Analysis

Mortgage-Backed Securities

Filters

Exam 6: Common Stock Valuation

A firm's current stock price divided by the firm's revenue per share is referred to as which one of the following ratios?

Which one of the following terms is used to identify the evaluation method that determines the value of a stock by reviewing a firm's financial statement in conjunction with other financial and economic information?

The model used to value the stock of a firm which has a short-term growth rate that varies from its long-term growth rate is called the ________ dividend growth model.

The price-sales ratio helps measure the ability of a firm to generate:

BP Industries stock is valued at $11.50 a share.The firm pays annual dividends at an increasing rate of 3.0 percent annually.Next year's dividend will be $1.15 per share.What is the required return on this stock?

Quality Home Made Ice Cream has plans to pay decreasing annual dividends of $1.60,$1.50,and $1.35 over the next three years,respectively.After that,the firm will increase the dividend by 5 percent each year.What is the value of this stock today at a discount rate of 11 percent?

The arithmetic average dividend growth rate is:

Precision Engineering recently announced that its next annual dividend will be $1.20 per share with later dividends increasing by 2.5 percent annually.What is the current value of this stock to you if you require a 12 percent rate of return?

The constant perpetual growth model assumes the:

The Boston House increases its dividend each year.The next annual dividend is expected to be $2.25 a share.Future dividends will increase by 5.0 percent annually.What is the current value of this stock if the discount rate is 13 percent?

A Brief History of Risk and Return

The Investment Process

Overview of Security Types

Mutual Funds and Other Investment Companies

The Stock Market

Stock Price Behavior and Market Efficiency

Behavioral Finance and the Psychology of Investing

Interest Rates

Bond Prices and Yields

Diversification and Risky Asset Allocation

Return,Risk,and the Security Market Line

Performance Evaluation and Risk Management

Futures Contracts

Stock Options

Option Valuation

Projecting Cash Flow and Earnings

Corporate and Government Bonds

Global Economic Activity and Industry Analysis

Mortgage-Backed Securities

Filters