Question 1

GEN has 3 million shares outstanding and a P/E ratio of 15. Its earnings per share is $3.00. What is GEN's market capitalization?

Accepted Answer

A) $45,000,000 
B) $135,000,000 
C) $112,000,000 
D) $9,000,000 
A) $45,000,000 
B) $135,000,000 
C) $112,000,000 
D) $9,000,000

Question 2

Target Corp. (TGT) recently earned a profit of $3.57 earnings per share and has a P/E ratio of 17.3. The dividend has been growing at a 14 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 increased to 23 in five years?

Accepted Answer

A) $118.85, $158.01 respectively 
B) $137.19, $182.39 respectively 
C) $173.87, $231.15 respectively 
D) $308.81, $410.55 respectively 
A) $118.85, $158.01 respectively 
B) $137.19, $182.39 respectively 
C) $173.87, $231.15 respectively 
D) $308.81, $410.55 respectively

Question 3

Coca-Cola recently paid a $3.00 dividend. Investors expect a 12 percent return on this stock. What is the difference in price if Coca-Cola is expected to grow at 7 percent versus 8 percent?

Accepted Answer

A) $11.40 
B) $16.80 
C) $21.60 
D) $19.40 
A) $11.40 
B) $16.80 
C) $21.60 
D) $19.40

Question 4

Ultra Petroleum (UPL) has earnings per share of $1.75 and P/E of 42.56. What is the stock price?

Accepted Answer

A) $74.48 
B) $76.68 
C) $85.68 
D) $112.98 
A) $74.48 
B) $76.68 
C) $85.68 
D) $112.98

Question 5

At your discount brokerage firm, it costs $7.95 per stock trade. How much money do you receive after selling 250 shares of General Electric (GE), which trades at $55.19?

Accepted Answer

A) $14,037.95 
B) $11,958.55 
C) $12,174.95 
D) $13,789.55 
A) $14,037.95 
B) $11,958.55 
C) $12,174.95 
D) $13,789.55

Question 6

A firm does not pay any dividends at this point in time. Which valuation method should be used on this stock?

Accepted Answer

A) Residual Claimant Model 
B) Variable Growth Model 
C) P/E Ratio Model 
D) Capital Gain Model 
A) Residual Claimant Model 
B) Variable Growth Model 
C) P/E Ratio Model 
D) Capital Gain Model

Question 7

At your discount brokerage firm, it costs $8.50 per stock trade. How much money do you need to buy 200 shares of Apple (AAPL), which trades at $171.54?

Accepted Answer

A) $32,608.00 
B) $34,299.50 
C) $34,316.50 
D) $36,008.00 
A) $32,608.00 
B) $34,299.50 
C) $34,316.50 
D) $36,008.00

Question 8

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 statements 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 statements are correct.

Question 9

The Dow Jones Industrial Average (DJIA) 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 10

Financial analysts forecast Best Buy Company (BBY) growth for the future to be 13 percent. Their recent dividend was $0.49. What is the value of their stock when the required rate of return is 14.13 percent?

Accepted Answer

A) $3.92 
B) $4.90 
C) $43.36 
D) $49.00 
A) $3.92 
B) $4.90 
C) $43.36 
D) $49.00

Question 11

On November 26, 2007, The Dow Jones Industrial Average closed at 12,743.40, which was down 237.44 that day. What was the return (in percent) of the stock market that day?

Accepted Answer

A) -0.02 percent 
B) +0.02 percent 
C) -1.83 percent 
D) +1.83 percent 
A) -0.02 percent 
B) +0.02 percent 
C) -1.83 percent 
D) +1.83 percent

Question 12

A fast growing firm recently paid a dividend of $0.80 per share. The dividend is expected to increase at a rate of 30 percent rate for the next four years. Afterwards, a more stable 7 percent growth rate can be assumed. If a 10 percent discount rate is appropriate for this stock, what is its value?

Accepted Answer

A) $60.48 
B) $60.18 
C) $61.34 
D) $73.86 
A) $60.48 
B) $60.18 
C) $61.34 
D) $73.86

Question 13

To list a stock on the NYSE, a company must meet minimum requirements that include all of the following EXCEPT:

Accepted Answer

A) firm size. 
B) total number of stockholders. 
C) level of trading volume. 
D) P/E ratio. 
A) firm size. 
B) total number of stockholders. 
C) level of trading volume. 
D) P/E ratio.

Question 14

Which of the following statements is incorrect?

Accepted Answer

A) Trading at the New York Stock Exchange and the American Stock Exchange are done by open outcry. 
B) Dealers create market liquidity in the Nasdaq's electronic market. 
C) The Dow Jones Industrial Average includes 35 of the largest companies in the United States. 
D) The Nasdaq contains many very large technology firms. 
A) Trading at the New York Stock Exchange and the American Stock Exchange are done by open outcry. 
B) Dealers create market liquidity in the Nasdaq's electronic market. 
C) The Dow Jones Industrial Average includes 35 of the largest companies in the United States. 
D) The Nasdaq contains many very large technology firms.

Question 15

A stock is expected to pay a $4.00 dividend per share. The growth rate is expected to be -1 percent. If investors demand 8 percent on this stock, what is the expected price of the stock three years from now?

Accepted Answer

A) $54.68 
B) $52.17 
C) $41.06 
D) $43.12 
A) $54.68 
B) $52.17 
C) $41.06 
D) $43.12

Question 16

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 17

Many companies grow very fast at first, but slower future growth can be expected. Such companies are called:

Accepted Answer

A) Fortune 500 companies. 
B) blue chip companies. 
C) variable growth rate firms. 
D) constant growth rate firms. 
A) Fortune 500 companies. 
B) blue chip companies. 
C) variable growth rate firms. 
D) constant growth rate firms.

Question 18

Stock valuation model dynamics make clear that higher growth rates lead to:

Accepted Answer

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

Question 19

As residual claimants, which of these investors claim any cash flows to the firm that remain after the firm pays all other claims?

Accepted Answer

A) Creditors 
B) Bondholders 
C) Preferred stockholders 
D) Common stockholders 
A) Creditors 
B) Bondholders 
C) Preferred stockholders 
D) Common stockholders

Question 20

Annual dividends of Pfizer, Inc. (PFE) grew from $0.38 in 2000 to $1.15 in 2007. What was the annual growth rate?

Accepted Answer

A) 2.02 percent 
B) 17.14 percent 
C) 28.95 percent 
D) 202.63 percent 
A) 2.02 percent 
B) 17.14 percent 
C) 28.95 percent 
D) 202.63 percent

GEN has 3 million shares outstanding and a P/E ratio of 15. Its earnings per share is $3.00. What is GEN's market capitalization?

Coca-Cola recently paid a $3.00 dividend. Investors expect a 12 percent return on this stock. What is the difference in price if Coca-Cola is expected to grow at 7 percent versus 8 percent?

Ultra Petroleum (UPL) has earnings per share of $1.75 and P/E of 42.56. What is the stock price?

At your discount brokerage firm, it costs $7.95 per stock trade. How much money do you receive after selling 250 shares of General Electric (GE), which trades at $55.19?

A firm does not pay any dividends at this point in time. Which valuation method should be used on this stock?

At your discount brokerage firm, it costs $8.50 per stock trade. How much money do you need to buy 200 shares of Apple (AAPL), which trades at $171.54?

Which of the following statements is incorrect?

The Dow Jones Industrial Average (DJIA) includes:

Financial analysts forecast Best Buy Company (BBY) growth for the future to be 13 percent. Their recent dividend was $0.49. What is the value of their stock when the required rate of return is 14.13 percent?

On November 26, 2007, The Dow Jones Industrial Average closed at 12,743.40, which was down 237.44 that day. What was the return (in percent) of the stock market that day?

A fast growing firm recently paid a dividend of $0.80 per share. The dividend is expected to increase at a rate of 30 percent rate for the next four years. Afterwards, a more stable 7 percent growth rate can be assumed. If a 10 percent discount rate is appropriate for this stock, what is its value?

To list a stock on the NYSE, a company must meet minimum requirements that include all of the following EXCEPT:

Which of the following statements is incorrect?

A stock is expected to pay a $4.00 dividend per share. The growth rate is expected to be -1 percent. If investors demand 8 percent on this stock, what is the expected price of the stock three years from now?

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?

Many companies grow very fast at first, but slower future growth can be expected. Such companies are called:

Stock valuation model dynamics make clear that higher growth rates lead to:

As residual claimants, which of these investors claim any cash flows to the firm that remain after the firm pays all other claims?

Annual dividends of Pfizer, Inc. (PFE) grew from $0.38 in 2000 to $1.15 in 2007. What was the annual growth rate?

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

GEN has 3 million shares outstanding and a P/E ratio of 15. Its earnings per share is $3.00. What is GEN's market capitalization?

Coca-Cola recently paid a $3.00 dividend. Investors expect a 12 percent return on this stock. What is the difference in price if Coca-Cola is expected to grow at 7 percent versus 8 percent?

Ultra Petroleum (UPL) has earnings per share of $1.75 and P/E of 42.56. What is the stock price?

At your discount brokerage firm, it costs $7.95 per stock trade. How much money do you receive after selling 250 shares of General Electric (GE), which trades at $55.19?

A firm does not pay any dividends at this point in time. Which valuation method should be used on this stock?

At your discount brokerage firm, it costs $8.50 per stock trade. How much money do you need to buy 200 shares of Apple (AAPL), which trades at $171.54?

Which of the following statements is incorrect?

The Dow Jones Industrial Average (DJIA) includes:

Financial analysts forecast Best Buy Company (BBY) growth for the future to be 13 percent. Their recent dividend was $0.49. What is the value of their stock when the required rate of return is 14.13 percent?

On November 26, 2007, The Dow Jones Industrial Average closed at 12,743.40, which was down 237.44 that day. What was the return (in percent) of the stock market that day?

A fast growing firm recently paid a dividend of $0.80 per share. The dividend is expected to increase at a rate of 30 percent rate for the next four years. Afterwards, a more stable 7 percent growth rate can be assumed. If a 10 percent discount rate is appropriate for this stock, what is its value?

To list a stock on the NYSE, a company must meet minimum requirements that include all of the following EXCEPT:

Which of the following statements is incorrect?

A stock is expected to pay a $4.00 dividend per share. The growth rate is expected to be -1 percent. If investors demand 8 percent on this stock, what is the expected price of the stock three years from now?

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?

Many companies grow very fast at first, but slower future growth can be expected. Such companies are called:

Stock valuation model dynamics make clear that higher growth rates lead to:

As residual claimants, which of these investors claim any cash flows to the firm that remain after the firm pays all other claims?

Annual dividends of Pfizer, Inc. (PFE) grew from $0.38 in 2000 to $1.15 in 2007. What was the annual growth rate?

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