Exam 8: Stock Valuation

Crystal Glass recently paid $3.60 as an annual dividend.Future dividends are projected at $3.80,$4.10,and $4.25 over the next 3 years,respectively.Beginning 4 years from now,the dividend is expected to increase by 3.25 percent annually.What is one share of this stock worth to you if you require a 12.5 percent rate of return on similar investments?

Diets For You announced today that it will begin paying annual dividends next year.The first dividend will be $0.12 a share.The following dividends will be $0.15,$0.20,$0.50,and $0.75 a share annually for the following 4 years,respectively.After that,dividends are projected to increase by 4 percent per year.How much are you willing to pay to buy one share of this stock today if your desired rate of return is 8.5 percent?

The current dividend yield on Clayton's Metals common stock is 3.2 percent.The company just paid a $1.48 annual dividend and announced plans to pay $1.54 next year.The dividend growth rate is expected to remain constant at the current level.What is the required rate of return on this stock?

Sessler Manufacturers made two announcements concerning its common stock today.First,the company announced that the next annual dividend will be $1.75 a share.Secondly,all dividends after that will decrease by 1.5 percent annually.What is the maximum amount you should pay to purchase a share of this stock today if you require a 14 percent rate of return?

Which one of the following rights is never directly granted to all shareholders of a publicly-held corporation?

The preferred stock of Rail Lines,Inc.,pays an annual dividend of $12.25 and sells for $59.70 a share.What is the rate of return on this security?

What is the model called that determines the present value of a stock based on its next annual dividend,the dividend growth rate,and the applicable discount rate?

Winter Time Adventures is going to pay an annual dividend of $2.86 a share on its common stock next year.This year,the company paid a dividend of $2.75 a share.The company adheres to a constant rate of growth dividend policy.What will one share of this common stock be worth five years from now if the applicable discount rate is 11.7 percent?

National Trucking has paid an annual dividend of $1.00 per share on its common stock for the past fifteen years and is expected to continue paying a dollar a share long into the future.Given this,one share of the firm's stock is:

Southern Utilities just issued some new preferred stock.The issue will pay a $19 annual dividend in perpetuity beginning 9 years from now.What is one share of this stock worth today if the market requires a 7 percent return on this investment?

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

Miller Brothers Hardware paid an annual dividend of $0.95 per share last month.Today,the company announced that future dividends will be increasing by 2.6 percent annually.If you require a 13 percent rate of return,how much are you willing to pay to purchase one share of this stock today?

Langley Enterprises pays a constant dividend of $0.85 a share.The company announced today that it will continue to pay the dividend for another 2 years after which time all dividends will cease.What is one share of this stock worth today if the required rate of return is 16.5 percent?

Show Boat Dinner Theatres has paid annual dividends of $0.32,$0.52,and $0.60 a share over the past three years,respectively.The company now predicts that it will maintain a constant dividend since its business has leveled off and sales are expected to remain relatively flat.Given the lack of future growth,you will only buy this stock if you can earn at least a 19 percent rate of return.What is the maximum amount you are willing to pay for one share of this stock today?

Boston Free Press has a dividend policy whereby the firm pays a constant annual dividend of $2.40 per share of common stock.The firm has 1,000 shares of stock outstanding.The company:

An increase in which of the following will increase the current value of a stock according to the dividend growth model? I.dividend amount II.number of future dividends,provided the current number is less than infinite III.discount rate IV.dividend growth rate

Kelley wants to purchase shares in Classic Kars,Inc.,but is torn between buying shares of common stock or shares of preferred stock.What should he consider before determining the type of share he should purchase?

Jefferson Mills just paid a dividend of $1.56 per share on its stock.The dividends are expected to grow at a constant rate of 8 percent per year,indefinitely.What will the price of this stock be in 7 years if investors require a 15 percent rate of return?

You want to be on the board of directors of Wisely Foods.Since you are the only shareholder that will vote for you,you will need to own more than half of the outstanding shares of stock if you are to be elected to the board.What is the type of voting called that requires this level of stock ownership to be successfully elected under these conditions?

KL Airlines paid an annual dividend of $1.18 a share last month.The company is planning on paying $1.50,$1.75,and $1.80 a share over the next 3 years,respectively.After that,the dividend will be constant at $1.50 per share per year.What is the market price of this stock if the market rate of return is 10.5 percent?