Question 1

We often use the P/E ratio model with the firm's growth rate to estimate:

Accepted Answer

A) required rates of return. 
B) inflation. 
C) a stock's current price. 
D) a stock's future price. 
A) required rates of return. 
B) inflation. 
C) a stock's current price. 
D) a stock's future price.

Question 2

A stock is expected to pay a $5.00 dividend per share. The growth rate is expected to be -2 percent. If investors demand 8 percent on this stock, what is the expected price of the stock five years from now?

Accepted Answer

A) $54.68 
B) $45.20 
C) $41.06 
D) $53.12 
A) $54.68 
B) $45.20 
C) $41.06 
D) $53.12

Question 3

A stock is expected to pay a $1.00 dividend per share. The growth rate is expected to be 4 percent. If investors demand 10 percent on this stock, what is the expected price of the stock 10 years from now?

Accepted Answer

A) $24.68 
B) $22.17 
C) $25.00 
D) $26.93 
A) $24.68 
B) $22.17 
C) $25.00 
D) $26.93

Question 4

A firm recently paid a $0.30 annual dividend. The dividend is expected to increase by 8 percent in each of the next four years. In the fourth year, the stock price is expected to be $60. If the required rate for this stock is 10 percent, what is its value?

Accepted Answer

A) $15.00 
B) $20.41 
C) $42.13 
D) $45.30 
A) $15.00 
B) $20.41 
C) $42.13 
D) $45.30

Question 5

Best Buy Co. (BBY) paid a $0.27 dividend per share in 2003, which grew to $0.49 in 2007. This growth is expected to continue. What is the value of this stock at the beginning of 2007 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 6

A stock is expected to pay a $4.00 dividend per share. The growth rate is expected to be 5 percent. If investors demand 10 percent on this stock, what is the expected price of the stock 10 years from now?

Accepted Answer

A) $94.68 
B) $92.17 
C) $130.31 
D) $126.93 
A) $94.68 
B) $92.17 
C) $130.31 
D) $126.93

Question 7

A firm's stock is selling at $75.00 per share. Its growth rate is 10 percent and investors demand 17 percent on this stock. What is the firm's expected dividend?

Accepted Answer

A) $4.75 
B) $5.95 
C) $6.25 
D) $5.25 
A) $4.75 
B) $5.95 
C) $6.25 
D) $5.25

Question 8

At your full-service brokerage firm, it costs $110 per stock trade. How much money do you receive after selling 100 shares of Time Warner, Inc. (TMX), which trades at $22.62?

Accepted Answer

A) $2,152.00 
B) $2,262.00 
C) $2,372.00 
D) $2,388.20 
A) $2,152.00 
B) $2,262.00 
C) $2,372.00 
D) $2,388.20

Question 9

Value stocks are:

Accepted Answer

A) stocks that are expected to exhibit high growth. 
B) stocks that have low P/E ratios and are selling at a bargain price. 
C) stocks that have high valuation ratios, such as P/E. 
D) none of these. 
A) stocks that are expected to exhibit high growth. 
B) stocks that have low P/E ratios and are selling at a bargain price. 
C) stocks that have high valuation ratios, such as P/E. 
D) none of these.

Question 10

A firm's recent dividend was $4.00 per share. The stock is selling in the market place for $55.00 per share. If investors are demanding 12 percent on this stock, what is this stock's growth rate?

Accepted Answer

A) 4.73 percent 
B) 4.41 percent 
C) 5.91 percent 
D) 6.14 percent 
A) 4.73 percent 
B) 4.41 percent 
C) 5.91 percent 
D) 6.14 percent

Question 11

Which of these are valued as a special zero-growth case of the constant growth rate model?

Accepted Answer

A) Common stock 
B) Preferred stock 
C) Future dividends 
D) Future stock prices 
A) Common stock 
B) Preferred stock 
C) Future dividends 
D) Future stock prices

Question 12

A firm is expected to pay a dividend of $2.00 next year and $2.14 the following year. Financial analysts believe the stock will be at their target price of $75.00 in two years. Compute the value of this stock with a required return of 10 percent.

Accepted Answer

A) $65.40 
B) $66.67 
C) $65.57 
D) $79.14 
A) $65.40 
B) $66.67 
C) $65.57 
D) $79.14

Question 13

American Eagle Outfitters (AEO) recently paid a $0.38 dividend. The dividend is expected to grow at a 15.5 percent rate. At the current stock price of $24.07, what is the return shareholders are expecting?

Accepted Answer

A) 15.50 percent 
B) 15.52 percent 
C) 17.08 percent 
D) 17.32 percent 
A) 15.50 percent 
B) 15.52 percent 
C) 17.08 percent 
D) 17.32 percent

Question 14

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 15

Which of these investors earn returns from receiving dividends and from stock price appreciation?

Accepted Answer

A) Bondholders 
B) Stockholders 
C) Investment bankers 
D) Managers 
A) Bondholders 
B) Stockholders 
C) Investment bankers 
D) Managers

Question 16

Why is the ask price higher than the bid price?

Accepted Answer

A) It represents the gain a market maker achieves. 
B) It represents the gain the stock seller achieves. 
C) It represents the gain the stock buy achieves. 
D) It represents the gain all participants will achieve. 
A) It represents the gain a market maker achieves. 
B) It represents the gain the stock seller achieves. 
C) It represents the gain the stock buy achieves. 
D) It represents the gain all participants will achieve.

Question 17

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 18

GEN has 1 million shares outstanding and a P/E ratio of 12. Its earnings per share is $2.00. What is GEN's market capitalization?

Accepted Answer

A) $24,000,000 
B) $12,000,000 
C) $2,000,000 
D) $96,000,000 
A) $24,000,000 
B) $12,000,000 
C) $2,000,000 
D) $96,000,000

Question 19

Which of the following will only be executed if the order's price conditions are met?

Accepted Answer

A) A trade 
B) A limit order 
C) An unlimited order 
D) A spread 
A) A trade 
B) A limit order 
C) An unlimited order 
D) A spread

Question 20

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

We often use the P/E ratio model with the firm's growth rate to estimate:

A stock is expected to pay a $5.00 dividend per share. The growth rate is expected to be -2 percent. If investors demand 8 percent on this stock, what is the expected price of the stock five years from now?

A stock is expected to pay a $1.00 dividend per share. The growth rate is expected to be 4 percent. If investors demand 10 percent on this stock, what is the expected price of the stock 10 years from now?

A firm recently paid a $0.30 annual dividend. The dividend is expected to increase by 8 percent in each of the next four years. In the fourth year, the stock price is expected to be $60. If the required rate for this stock is 10 percent, what is its value?

Best Buy Co. (BBY) paid a $0.27 dividend per share in 2003, which grew to $0.49 in 2007. This growth is expected to continue. What is the value of this stock at the beginning of 2007 when the required rate of return is 17.23 percent?

A stock is expected to pay a $4.00 dividend per share. The growth rate is expected to be 5 percent. If investors demand 10 percent on this stock, what is the expected price of the stock 10 years from now?

A firm's stock is selling at $75.00 per share. Its growth rate is 10 percent and investors demand 17 percent on this stock. What is the firm's expected dividend?

At your full-service brokerage firm, it costs $110 per stock trade. How much money do you receive after selling 100 shares of Time Warner, Inc. (TMX), which trades at $22.62?

Value stocks are:

A firm's recent dividend was $4.00 per share. The stock is selling in the market place for $55.00 per share. If investors are demanding 12 percent on this stock, what is this stock's growth rate?

Which of these are valued as a special zero-growth case of the constant growth rate model?

A firm is expected to pay a dividend of $2.00 next year and $2.14 the following year. Financial analysts believe the stock will be at their target price of $75.00 in two years. Compute the value of this stock with a required return of 10 percent.

American Eagle Outfitters (AEO) recently paid a $0.38 dividend. The dividend is expected to grow at a 15.5 percent rate. At the current stock price of $24.07, what is the return shareholders are expecting?

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?

Which of these investors earn returns from receiving dividends and from stock price appreciation?

Why is the ask price higher than the bid price?

The Standard & Poor's 500 Index includes:

GEN has 1 million shares outstanding and a P/E ratio of 12. Its earnings per share is $2.00. What is GEN's market capitalization?

Which of the following will only be executed if the order's price conditions are met?

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?

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

We often use the P/E ratio model with the firm's growth rate to estimate:

A stock is expected to pay a $5.00 dividend per share. The growth rate is expected to be -2 percent. If investors demand 8 percent on this stock, what is the expected price of the stock five years from now?

A stock is expected to pay a $1.00 dividend per share. The growth rate is expected to be 4 percent. If investors demand 10 percent on this stock, what is the expected price of the stock 10 years from now?

A firm recently paid a $0.30 annual dividend. The dividend is expected to increase by 8 percent in each of the next four years. In the fourth year, the stock price is expected to be $60. If the required rate for this stock is 10 percent, what is its value?

Best Buy Co. (BBY) paid a $0.27 dividend per share in 2003, which grew to $0.49 in 2007. This growth is expected to continue. What is the value of this stock at the beginning of 2007 when the required rate of return is 17.23 percent?

A stock is expected to pay a $4.00 dividend per share. The growth rate is expected to be 5 percent. If investors demand 10 percent on this stock, what is the expected price of the stock 10 years from now?

A firm's stock is selling at $75.00 per share. Its growth rate is 10 percent and investors demand 17 percent on this stock. What is the firm's expected dividend?

At your full-service brokerage firm, it costs $110 per stock trade. How much money do you receive after selling 100 shares of Time Warner, Inc. (TMX), which trades at $22.62?

Value stocks are:

A firm's recent dividend was $4.00 per share. The stock is selling in the market place for $55.00 per share. If investors are demanding 12 percent on this stock, what is this stock's growth rate?

Which of these are valued as a special zero-growth case of the constant growth rate model?

A firm is expected to pay a dividend of $2.00 next year and $2.14 the following year. Financial analysts believe the stock will be at their target price of $75.00 in two years. Compute the value of this stock with a required return of 10 percent.

American Eagle Outfitters (AEO) recently paid a $0.38 dividend. The dividend is expected to grow at a 15.5 percent rate. At the current stock price of $24.07, what is the return shareholders are expecting?

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?

Which of these investors earn returns from receiving dividends and from stock price appreciation?

Why is the ask price higher than the bid price?

The Standard & Poor's 500 Index includes:

GEN has 1 million shares outstanding and a P/E ratio of 12. Its earnings per share is $2.00. What is GEN's market capitalization?

Which of the following will only be executed if the order's price conditions are met?

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?

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