Question 1

Individuals who use their own stock inventory and capital to buy and sell the stocks they represent are called

Accepted Answer

A) market makers. 
B) brokers. 
C) investors. 
D) none of the options. 
A) market makers. 
B) brokers. 
C) investors. 
D) none of the options.

Question 2

Consider a firm that had been priced using a 12 percent growth rate and a 16 percent required return. The firm recently paid a $5.00 dividend. The firm has just announced that because of a new joint venture, it will likely grow at a 12.5 percent rate. How much should the stock price change (in dollars and percentage)?

Accepted Answer

A) $21.50; 13.72 percent 
B) $21.50; 16.14 percent 
C) $20.71; 14.79 percent 
D) $20.71; 19.93 percent 
A) $21.50; 13.72 percent 
B) $21.50; 16.14 percent 
C) $20.71; 14.79 percent 
D) $20.71; 19.93 percent

Question 3

When residual cash flows are high, stock values will be

Accepted Answer

A) unchanged. 
B) low. 
C) high. 
D) unpredictable. 
A) unchanged. 
B) low. 
C) high. 
D) unpredictable.

Question 4

Value stocks usually have

Accepted Answer

A) low P/E ratios and high growth rates. 
B) high P/E ratios and low growth rates. 
C) low P/E ratios and low growth rates. 
D) high P/E ratios and high growth rates. 
A) low P/E ratios and high growth rates. 
B) high P/E ratios and low growth rates. 
C) low P/E ratios and low growth rates. 
D) high P/E ratios and high growth rates.

Question 5

A firm has been losing sales due to technological obsolescence. It projects growth for the future to be −3 percent. Its recent dividend was $2.50. What is the value of this stock when the required return is 7 percent?

Accepted Answer

A) $28.17 
B) $24.25 
C) $17.42 
D) $15.53 
A) $28.17 
B) $24.25 
C) $17.42 
D) $15.53

Question 6

The NASDAQ Composite includes

Accepted Answer

A) all of the stocks listed on the NASDAQ Stock Exchange. 
B) 30 of the largest (market capitalization) and most active companies in the U.S. economy. 
C) 500 firms that are the largest in their respective economic sectors. 
D) 500 firms that are the largest as ranked by Fortune Magazine. 
A) all of the stocks listed on the NASDAQ Stock Exchange. 
B) 30 of the largest (market capitalization) and most active companies in the U.S. economy. 
C) 500 firms that are the largest in their respective economic sectors. 
D) 500 firms that are the largest as ranked by Fortune Magazine.

Question 7

At your full-service brokerage firm, it costs $125 per stock trade. How much money do you receive after selling 200 shares of Time Warner, Inc. (TMX), which trades at $29.54?

Accepted Answer

A) $5,783.00 
B) $5,908.00 
C) $6,033.00 
D) $19,092.00 
A) $5,783.00 
B) $5,908.00 
C) $6,033.00 
D) $19,092.00

Question 8

Dividend yield is defined as

Accepted Answer

A) the last four quarters of dividend income expressed as a percentage of the par value of the stock. 
B) the last four quarters of dividend income expressed as a percentage of the current stock price. 
C) the last dividend paid expressed as a percentage of the current stock price. 
D) the next dividend to be paid expressed as a percentage of the current stock price. 
A) the last four quarters of dividend income expressed as a percentage of the par value of the stock. 
B) the last four quarters of dividend income expressed as a percentage of the current stock price. 
C) the last dividend paid expressed as a percentage of the current stock price. 
D) the next dividend to be paid expressed as a percentage of the current stock price.

Question 9

Best Buy Co. (BBY) paid a $0.27 dividend per share in 2003, which grew to $0.49 in 2017. This growth is expected to continue. What is the value of this stock at the beginning of 2017 when the required rate of return is 17.23 percent?

Accepted Answer

A) $2.84 
B) $42.24 
C) $49.03 
D) $50.78 
A) $2.84 
B) $42.24 
C) $49.03 
D) $50.78

Question 10

A fast growing firm recently paid a dividend of $0.50 per share. The dividend is expected to increase at a 25 percent rate for the next 3 years. Afterwards, a more stable 12 percent growth rate can be assumed. If a 15 percent discount rate is appropriate for this stock, what is its value?

Accepted Answer

A) $5.00 
B) $22.62 
C) $25.75 
D) $36.46 
A) $5.00 
B) $22.62 
C) $25.75 
D) $36.46

Question 11

The Standard & Poor's 500 Index includes

Accepted Answer

A) all of the stock listed on the New York Stock Exchange. 
B) 30 of the largest (market capitalization) and most active companies in the U.S. economy. 
C) 500 firms that are the largest in their respective economic sectors. 
D) 500 firms that are the largest as ranked by Fortune Magazine. 
A) all of the stock listed on the New York Stock Exchange. 
B) 30 of the largest (market capitalization) and most active companies in the U.S. economy. 
C) 500 firms that are the largest in their respective economic sectors. 
D) 500 firms that are the largest as ranked by Fortune Magazine.

Question 12

Home Depot (HD) recently paid a $0.90 dividend. The dividend is expected to grow at a 17 percent rate. At the current stock price of $33.08, what is the return shareholders are expecting?

Accepted Answer

A) 2.70 percent 
B) 17.03 percent 
C) 17.18 percent 
D) 20.18 percent 
A) 2.70 percent 
B) 17.03 percent 
C) 17.18 percent 
D) 20.18 percent

Question 13

A fast growing firm recently paid a dividend of $1.00 per share. The dividend is expected to increase at a 25 percent rate for the next three years. Afterwards, a more stable 8 percent growth rate can be assumed. If a 10 percent discount rate is appropriate for this stock, what is its value?

Accepted Answer

A) $12.50 
B) $75.93 
C) $83.13 
D) $120.24 
A) $12.50 
B) $75.93 
C) $83.13 
D) $120.24

Question 14

Walmart (WMT) recently earned a profit of $3.13 per share and has a P/E ratio of 14.22. The dividend has been growing at a 12.5 percent rate over the past few years. If this growth continues, what would be the stock price in five years if the P/E ratio remained unchanged? What would the price be if the P/E ratio declined to 10 in five years?

Accepted Answer

A) $6.08, $5.04 respectively 
B) $72.22, $50.40 respectively 
C) $80.20, $56.40 respectively 
D) $86.46, $60.80 respectively 
A) $6.08, $5.04 respectively 
B) $72.22, $50.40 respectively 
C) $80.20, $56.40 respectively 
D) $86.46, $60.80 respectively

Question 15

If a preferred stock from Pfizer Inc. (PFE) pays $3.00 in annual dividends, and the required return on the preferred stock is 7 percent, what's the value of the stock?

Accepted Answer

A) $0.21 
B) $0.43 
C) $21.00 
D) $42.86 
A) $0.21 
B) $0.43 
C) $21.00 
D) $42.86

Question 16

At your discount brokerage firm, it costs $9.95 per stock trade. How much money do you need to buy 200 shares of General Electric (GE), which trades at $45.19?

Accepted Answer

A) $9,038.00 
B) $4,528.95 
C) $9,047.95 
D) $4,595.95 
A) $9,038.00 
B) $4,528.95 
C) $9,047.95 
D) $4,595.95

Question 17

Campbell Soup Co. paid a $1.55 dividend per share in 2012, which grew to $1.95 in 2017. This growth is expected to continue. What is the value of this stock at the beginning of 2017 when the required return is 10.5 percent?

Accepted Answer

A) $35.20 
B) $34.16 
C) $33.48 
D) $32.17 
A) $35.20 
B) $34.16 
C) $33.48 
D) $32.17

Question 18

JUJU's dividend next year is expected to be $1.50. It is trading at $45 and is expected to grow at 9 percent per year. What is JUJU's dividend yield and capital gain?

Accepted Answer

A) 1.5 percent; 6 percent 
B) 9 percent; 3.33 percent 
C) 3.33 percent; 9 percent 
D) 6 percent; 1.5 percent 
A) 1.5 percent; 6 percent 
B) 9 percent; 3.33 percent 
C) 3.33 percent; 9 percent 
D) 6 percent; 1.5 percent

Question 19

Stock valuation model dynamics make clear that lower discount rates lead to

Accepted Answer

A) lower valuations. 
B) higher valuations. 
C) lower growth rates. 
D) higher growth rates. 
A) lower valuations. 
B) higher valuations. 
C) lower growth rates. 
D) higher growth rates.

Question 20

Which of the following statements is incorrect?

Accepted Answer

A) Preferred stock prices fluctuate with market interest rates and behave like corporate bond prices. 
B) Common stock price changes with the value of the company's underlying business. 
C) Preferred stockholders have higher precedence for payment in the event of firm liquidation from bankruptcy. 
D) All of these choices are correct. 
A) Preferred stock prices fluctuate with market interest rates and behave like corporate bond prices. 
B) Common stock price changes with the value of the company's underlying business. 
C) Preferred stockholders have higher precedence for payment in the event of firm liquidation from bankruptcy. 
D) All of these choices are correct.

Individuals who use their own stock inventory and capital to buy and sell the stocks they represent are called

When residual cash flows are high, stock values will be

Value stocks usually have

A firm has been losing sales due to technological obsolescence. It projects growth for the future to be −3 percent. Its recent dividend was $2.50. What is the value of this stock when the required return is 7 percent?

The NASDAQ Composite includes

At your full-service brokerage firm, it costs $125 per stock trade. How much money do you receive after selling 200 shares of Time Warner, Inc. (TMX), which trades at $29.54?

Dividend yield is defined as

Best Buy Co. (BBY) paid a $0.27 dividend per share in 2003, which grew to $0.49 in 2017. This growth is expected to continue. What is the value of this stock at the beginning of 2017 when the required rate of return is 17.23 percent?

A fast growing firm recently paid a dividend of $0.50 per share. The dividend is expected to increase at a 25 percent rate for the next 3 years. Afterwards, a more stable 12 percent growth rate can be assumed. If a 15 percent discount rate is appropriate for this stock, what is its value?

The Standard & Poor's 500 Index includes

Home Depot (HD) recently paid a $0.90 dividend. The dividend is expected to grow at a 17 percent rate. At the current stock price of $33.08, what is the return shareholders are expecting?

A fast growing firm recently paid a dividend of $1.00 per share. The dividend is expected to increase at a 25 percent rate for the next three years. Afterwards, a more stable 8 percent growth rate can be assumed. If a 10 percent discount rate is appropriate for this stock, what is its value?

If a preferred stock from Pfizer Inc. (PFE) pays $3.00 in annual dividends, and the required return on the preferred stock is 7 percent, what's the value of the stock?

At your discount brokerage firm, it costs $9.95 per stock trade. How much money do you need to buy 200 shares of General Electric (GE), which trades at $45.19?

Campbell Soup Co. paid a $1.55 dividend per share in 2012, which grew to $1.95 in 2017. This growth is expected to continue. What is the value of this stock at the beginning of 2017 when the required return is 10.5 percent?

JUJU's dividend next year is expected to be $1.50. It is trading at $45 and is expected to grow at 9 percent per year. What is JUJU's dividend yield and capital gain?

Stock valuation model dynamics make clear that lower discount rates lead to

Which of the following statements is incorrect?

Introduction to Financial Management

Reviewing Financial Statements

Analyzing Financial Statements

Time Value of Money 1: Analyzing Single Cash Flows

Time Value of Money 2: Analyzing Annuity Cash Flows

Understanding Financial Markets and Institutions

Valuing Bonds

Characterizing Risk and Return

Estimating Risk and Return

Calculating the Cost of Capital

Estimating Cash Flows on Capital Budgeting Projects

Weighing Net Present Value and Other Capital Budgeting Criteria

Working Capital Management and Policies

Financial Planning and Forecasting

Assessing Long-Term Debt, Equity, and Capital Structure

Sharing Firm Wealth: Dividends, Share Repurchases, and Other Payouts

Issuing Capital and the Investment Banking Process

International Corporate Finance

Mergers and Acquisitions and Financial Distress

Filters

Exam 8: Valuing Stocks

Individuals who use their own stock inventory and capital to buy and sell the stocks they represent are called

When residual cash flows are high, stock values will be

Value stocks usually have

A firm has been losing sales due to technological obsolescence. It projects growth for the future to be −3 percent. Its recent dividend was $2.50. What is the value of this stock when the required return is 7 percent?

The NASDAQ Composite includes

At your full-service brokerage firm, it costs $125 per stock trade. How much money do you receive after selling 200 shares of Time Warner, Inc. (TMX), which trades at $29.54?

Dividend yield is defined as

Best Buy Co. (BBY) paid a $0.27 dividend per share in 2003, which grew to $0.49 in 2017. This growth is expected to continue. What is the value of this stock at the beginning of 2017 when the required rate of return is 17.23 percent?

A fast growing firm recently paid a dividend of $0.50 per share. The dividend is expected to increase at a 25 percent rate for the next 3 years. Afterwards, a more stable 12 percent growth rate can be assumed. If a 15 percent discount rate is appropriate for this stock, what is its value?

The Standard & Poor's 500 Index includes

Home Depot (HD) recently paid a $0.90 dividend. The dividend is expected to grow at a 17 percent rate. At the current stock price of $33.08, what is the return shareholders are expecting?

A fast growing firm recently paid a dividend of $1.00 per share. The dividend is expected to increase at a 25 percent rate for the next three years. Afterwards, a more stable 8 percent growth rate can be assumed. If a 10 percent discount rate is appropriate for this stock, what is its value?

If a preferred stock from Pfizer Inc. (PFE) pays $3.00 in annual dividends, and the required return on the preferred stock is 7 percent, what's the value of the stock?

At your discount brokerage firm, it costs $9.95 per stock trade. How much money do you need to buy 200 shares of General Electric (GE), which trades at $45.19?

Campbell Soup Co. paid a $1.55 dividend per share in 2012, which grew to $1.95 in 2017. This growth is expected to continue. What is the value of this stock at the beginning of 2017 when the required return is 10.5 percent?

JUJU's dividend next year is expected to be $1.50. It is trading at $45 and is expected to grow at 9 percent per year. What is JUJU's dividend yield and capital gain?

Stock valuation model dynamics make clear that lower discount rates lead to

Which of the following statements is incorrect?

Introduction to Financial Management

Reviewing Financial Statements

Analyzing Financial Statements

Time Value of Money 1: Analyzing Single Cash Flows

Time Value of Money 2: Analyzing Annuity Cash Flows

Understanding Financial Markets and Institutions

Valuing Bonds

Characterizing Risk and Return

Estimating Risk and Return

Calculating the Cost of Capital

Estimating Cash Flows on Capital Budgeting Projects

Weighing Net Present Value and Other Capital Budgeting Criteria

Working Capital Management and Policies

Financial Planning and Forecasting

Assessing Long-Term Debt, Equity, and Capital Structure

Sharing Firm Wealth: Dividends, Share Repurchases, and Other Payouts

Issuing Capital and the Investment Banking Process

International Corporate Finance

Mergers and Acquisitions and Financial Distress

Filters