Exam 6: Common Stock Valuation

The common stock of JL Recyclers has a required return of 12 percent and a current value of $18.72.The company pays its dividend annually and increases the amount by 4 percent each year.You own 300 shares of this stock.What was the total amount of the last dividend you received?

Upwind Tours just announced that it will pay an annual dividend of $3.60 a share one year from now.Two years from now,the company expects to pay a $28 a share liquidating dividend.After that,the company will cease operations.What is the current value per share at a discount rate of 12.5 percent?

Best Value Outlet recently announced that it intends to pay dividends of $0.40,$0.60,$0.75,and $1.00 per share over the next four years,respectively.After that,the plan is to increase the dividend by 3.5 percent annually.What is the current value of this stock if the applicable discount rate is 13.5 percent?

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?

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?

The retention ratio is the:

Electronics Galore has historically had a P/E ratio of 23.4.This ratio is considered a good estimate of the future ratio.The firm currently has EPS of $1.68.These earnings are expected to increase by 4.2 percent next year.What is the expected price of this stock one year from now?

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?

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?

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?

What is beta?

What is the percentage of a firm's net income which is reinvested in the firm to support future growth called?

Which one of the following models can be used to value the stock of a firm that maintains a one hundred percent 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 0.40 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 8.0%.What is the current total value of Beach & Company (in millions)?

The Free Cash Flow Model: I.can be used to value a company with negative earnings II.is based on a firm having positive cash flows III.requires that a firm pay a dividend IV.directly estimates a value for a firm's equity

Which one of the following statements concerning beta is correct?

DT Industries stock is valued at $10.40 a share.The firm pays annual dividends at an increasing rate of 2.5 percent annually.Next year's dividend will be $1.05 per share.What is the required return on this stock?

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.

An increase in the retention ratio will:

Mountain Top Nursery is a relatively young firm which just paid its first annual dividend of $0.30 a share.Management projects dividend increases of 15 percent per year for five years followed by a constant growth rate of 3.0 percent annually.What is this stock worth today if the applicable discount rate is 12.5 percent?