Question 1

On November 27, 2007, The Dow Jones Industrial Average closed at 12,958.44, which was up 215.04 that day. What was the return (in percent) of the stock market that day?

Accepted Answer

A) -0.017 percent 
B) +0.017 percent 
C) -1.69 percent 
D) +1.69 percent 
A) -0.017 percent 
B) +0.017 percent 
C) -1.69 percent 
D) +1.69 percent

Question 2

Sally has researched GLE and wants to pay no more than $50 for the stock. Currently, GLE is trading in the market for $54. Sally would be best served to:

Accepted Answer

A) buy using a limit order. 
B) buy using a market order. 
C) use the bid-ask spread to her advantage. 
D) None of these. 
A) buy using a limit order. 
B) buy using a market order. 
C) use the bid-ask spread to her advantage. 
D) None of these.

Question 3

A firm's recent dividend was $2.00 per share. The stock is selling in the market place for $50.00 per share. If investors are demanding 10 percent on this stock, what is this stock's growth rate?

Accepted Answer

A) 4.73 percent 
B) 5.92 percent 
C) 6.00 percent 
D) 5.77 percent 
A) 4.73 percent 
B) 5.92 percent 
C) 6.00 percent 
D) 5.77 percent

Question 4

A preferred stock from DLC pays $3.00 in annual dividends. If the required return on the preferred stock is 9.3 percent, what is the value of the stock?

Accepted Answer

A) $34.89 
B) $32.26 
C) $38.49 
D) $31.13 
A) $34.89 
B) $32.26 
C) $38.49 
D) $31.13

Question 5

A fast growing firm recently paid a dividend of $1.00 per share. The dividend is expected to increase at a rate of 15 percent rate for the next 3 years. Afterwards, a more stable 6 percent growth rate can be assumed. If a 10 percent discount rate is appropriate for this stock, what is its value?

Accepted Answer

A) $33.54 
B) $37.99 
C) $39.37 
D) $42.03 
A) $33.54 
B) $37.99 
C) $39.37 
D) $42.03

Question 6

ABC has a net profit margin of 4.3 percent on Sales of $12,000,000. The firm has 250,000 shares outstanding. If the firm's P/E is 16 times, how much is the stock selling for?

Accepted Answer

A) $41.72 
B) $35.96 
C) $25.40 
D) $33.02 
A) $41.72 
B) $35.96 
C) $25.40 
D) $33.02

Question 7

A stock recently paid a dividend of $3 per share. Its growth rate is expected to be 8 percent. Investors require a 10 percent return. The stock is selling in the market for $140. What is this stock worth and is the stock undervalued or overvalued?

Accepted Answer

A) $162; undervalued 
B) $162; overvalued 
C) $150; undervalued 
D) $150; overvalued 
A) $162; undervalued 
B) $162; overvalued 
C) $150; undervalued 
D) $150; overvalued

Question 8

Ralph Lauren (RL) has earnings per share of $3.85 and a P/E ratio of 17.37. What is the stock price?

Accepted Answer

A) $0.22 
B) $4.51 
C) $22.16 
D) $66.87 
A) $0.22 
B) $4.51 
C) $22.16 
D) $66.87

Question 9

Investors buy stock at the:

Accepted Answer

A) dealer price. 
B) bid price. 
C) quoted ask price. 
D) broker price. 
A) dealer price. 
B) bid price. 
C) quoted ask price. 
D) broker price.

Question 10

Campbell Soup Co. paid a $1.55 dividend per share in 2004, which grew to $1.95 in 2009. This growth is expected to continue. What is the value of this stock at the beginning of 2010 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 11

A firm does not pay a dividend. It is expected to pay its first dividend of $0.10 per share in two years. This dividend will grow at 11 percent indefinitely. Using a 13 percent discount rate, compute the value of this stock.

Accepted Answer

A) $4.42 
B) $4.59 
C) $5.43 
D) $7.21 
A) $4.42 
B) $4.59 
C) $5.43 
D) $7.21

Question 12

A firm has been losing sales due to technological obsolescence. It projects growth for the future to be -2 percent. Its recent dividend was $2.00. What is the value of this stock when the required return is 9 percent?

Accepted Answer

A) $28.00 
B) $29.14 
C) $17.82 
D) $15.52 
A) $28.00 
B) $29.14 
C) $17.82 
D) $15.52

Question 13

The size of the firm measured as the current stock price multiplied by the number of shares outstanding is referred to as the firm's:

Accepted Answer

A) market capitalization. 
B) book value. 
C) market makers. 
D) constant growth model. 
A) market capitalization. 
B) book value. 
C) market makers. 
D) constant growth model.

Question 14

A firm is expected to pay a dividend of $3.00 next year and $3.21 the following year. Financial analysts believe the stock will be at their target price of $80.00 in two years. Compute the value of this stock with a required return of 13 percent.

Accepted Answer

A) $50.00 
B) $67.52 
C) $67.82 
D) $86.21 
A) $50.00 
B) $67.52 
C) $67.82 
D) $86.21

Question 15

A stock recently paid a dividend of $2.5 per share. Its growth rate is expected to be 8 percent. Investors require a 10 percent return. The stock is selling in the market for $150. What is this stock worth and is the stock undervalued or overvalued?

Accepted Answer

A) $125; undervalued 
B) $125; overvalued 
C) $135; undervalued 
D) $135; overvalued 
A) $125; undervalued 
B) $125; overvalued 
C) $135; undervalued 
D) $135; overvalued

Question 16

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

Question 17

Consider a firm that had been priced using a 6 percent growth rate and a 9 percent required rate. The firm recently paid a $0.50 dividend. The firm has just announced that because of a new joint venture, it will likely grow at an 8 percent rate. How much should the stock price change (in dollars and percentage)?

Accepted Answer

A) $33.33, 67 percent 
B) $33.33, 198 percent 
C) $36.33, 67 percent 
D) $36.33, 206 percent 
A) $33.33, 67 percent 
B) $33.33, 198 percent 
C) $36.33, 67 percent 
D) $36.33, 206 percent

Question 18

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 19

Which of the following is an electronic stock market without a physical trading floor?

Accepted Answer

A) American Stock Exchange 
B) Mercantile Exchange 
C) New York Stock Exchange 
D) Nasdaq Stock Market 
A) American Stock Exchange 
B) Mercantile Exchange 
C) New York Stock Exchange 
D) Nasdaq Stock Market

Question 20

Financial analysts forecast ABC Inc. growth for the future to be 12 percent. ABC's recent dividend was $1.60. What is the value of ABC stock when the required return is 15 percent?

Accepted Answer

A) $59.73 
B) $63.72 
C) $79.81 
D) $91.02 
A) $59.73 
B) $63.72 
C) $79.81 
D) $91.02

On November 27, 2007, The Dow Jones Industrial Average closed at 12,958.44, which was up 215.04 that day. What was the return (in percent) of the stock market that day?

Sally has researched GLE and wants to pay no more than $50 for the stock. Currently, GLE is trading in the market for $54. Sally would be best served to:

A firm's recent dividend was $2.00 per share. The stock is selling in the market place for $50.00 per share. If investors are demanding 10 percent on this stock, what is this stock's growth rate?

A preferred stock from DLC pays $3.00 in annual dividends. If the required return on the preferred stock is 9.3 percent, what is the value of the stock?

A fast growing firm recently paid a dividend of $1.00 per share. The dividend is expected to increase at a rate of 15 percent rate for the next 3 years. Afterwards, a more stable 6 percent growth rate can be assumed. If a 10 percent discount rate is appropriate for this stock, what is its value?

ABC has a net profit margin of 4.3 percent on Sales of $12,000,000. The firm has 250,000 shares outstanding. If the firm's P/E is 16 times, how much is the stock selling for?

A stock recently paid a dividend of $3 per share. Its growth rate is expected to be 8 percent. Investors require a 10 percent return. The stock is selling in the market for $140. What is this stock worth and is the stock undervalued or overvalued?

Ralph Lauren (RL) has earnings per share of $3.85 and a P/E ratio of 17.37. What is the stock price?

Investors buy stock at the:

Campbell Soup Co. paid a $1.55 dividend per share in 2004, which grew to $1.95 in 2009. This growth is expected to continue. What is the value of this stock at the beginning of 2010 when the required return is 10.5 percent?

A firm does not pay a dividend. It is expected to pay its first dividend of $0.10 per share in two years. This dividend will grow at 11 percent indefinitely. Using a 13 percent discount rate, compute the value of this stock.

A firm has been losing sales due to technological obsolescence. It projects growth for the future to be -2 percent. Its recent dividend was $2.00. What is the value of this stock when the required return is 9 percent?

The size of the firm measured as the current stock price multiplied by the number of shares outstanding is referred to as the firm's:

A firm is expected to pay a dividend of $3.00 next year and $3.21 the following year. Financial analysts believe the stock will be at their target price of $80.00 in two years. Compute the value of this stock with a required return of 13 percent.

A stock recently paid a dividend of $2.5 per share. Its growth rate is expected to be 8 percent. Investors require a 10 percent return. The stock is selling in the market for $150. What is this stock worth and is the stock undervalued or overvalued?

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

Dividend yield is defined as:

Which of the following is an electronic stock market without a physical trading floor?

Financial analysts forecast ABC Inc. growth for the future to be 12 percent. ABC's recent dividend was $1.60. What is the value of ABC stock when the required return is 15 percent?

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

Filters

Exam 8: Valuing Stocks

On November 27, 2007, The Dow Jones Industrial Average closed at 12,958.44, which was up 215.04 that day. What was the return (in percent) of the stock market that day?

Sally has researched GLE and wants to pay no more than $50 for the stock. Currently, GLE is trading in the market for $54. Sally would be best served to:

A firm's recent dividend was $2.00 per share. The stock is selling in the market place for $50.00 per share. If investors are demanding 10 percent on this stock, what is this stock's growth rate?

A preferred stock from DLC pays $3.00 in annual dividends. If the required return on the preferred stock is 9.3 percent, what is the value of the stock?

A fast growing firm recently paid a dividend of $1.00 per share. The dividend is expected to increase at a rate of 15 percent rate for the next 3 years. Afterwards, a more stable 6 percent growth rate can be assumed. If a 10 percent discount rate is appropriate for this stock, what is its value?

ABC has a net profit margin of 4.3 percent on Sales of $12,000,000. The firm has 250,000 shares outstanding. If the firm's P/E is 16 times, how much is the stock selling for?

A stock recently paid a dividend of $3 per share. Its growth rate is expected to be 8 percent. Investors require a 10 percent return. The stock is selling in the market for $140. What is this stock worth and is the stock undervalued or overvalued?

Ralph Lauren (RL) has earnings per share of $3.85 and a P/E ratio of 17.37. What is the stock price?

Investors buy stock at the:

Campbell Soup Co. paid a $1.55 dividend per share in 2004, which grew to $1.95 in 2009. This growth is expected to continue. What is the value of this stock at the beginning of 2010 when the required return is 10.5 percent?

A firm does not pay a dividend. It is expected to pay its first dividend of $0.10 per share in two years. This dividend will grow at 11 percent indefinitely. Using a 13 percent discount rate, compute the value of this stock.

A firm has been losing sales due to technological obsolescence. It projects growth for the future to be -2 percent. Its recent dividend was $2.00. What is the value of this stock when the required return is 9 percent?

The size of the firm measured as the current stock price multiplied by the number of shares outstanding is referred to as the firm's:

A firm is expected to pay a dividend of $3.00 next year and $3.21 the following year. Financial analysts believe the stock will be at their target price of $80.00 in two years. Compute the value of this stock with a required return of 13 percent.

A stock recently paid a dividend of $2.5 per share. Its growth rate is expected to be 8 percent. Investors require a 10 percent return. The stock is selling in the market for $150. What is this stock worth and is the stock undervalued or overvalued?

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

Dividend yield is defined as:

Which of the following is an electronic stock market without a physical trading floor?

Financial analysts forecast ABC Inc. growth for the future to be 12 percent. ABC's recent dividend was $1.60. What is the value of ABC stock when the required return is 15 percent?

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

Filters