Exam 7: Valuing Stocks

MJ LTD is expected to grow at various rates over the next five years.The company just paid a $1.00 dividend.The company expects to grow at 20% for the next two years (affecting D₁ and D₂),then the company expects to grow at 10% for three additional years (D₃,D₄,D₅)after which the company expects to grow at a constant rate of 5% per year indefinitely.If the required rate of return on MJ's common stock is 12%,then what is a share of MJ's stock worth?

If DM has $500 million of debt and 14 million shares of stock outstanding,then what is the price per share for DM Corporation?

You expect KT industries (KTI)will have earnings per share of $3 this year and expect that they will pay out $1.50 of these earnings to shareholders in the form of a dividend.KTI's return on new investments is 15% and their equity cost of capital is 12%.The value of a share of KTI's stock is closest to:

Luther Industries has a dividend yield of 4.5% and a cost of equity capital of 12%.Luther Industries' dividends are expected to grow at a constant rate indefinitely.The grow rate of Luther's dividends are closest to:

The Rufus Corporation has 125 million shares outstanding and analysts expect Rufus to have earnings of $500 million this year.Rufus plans to pay out 40% of its earnings in dividends and they expect to use another 20% of their earnings to repurchase shares.If Rufus' equity cost of capital is 15% and Rufus' earnings are expected to grow at a rate of 3% per year,then the value of a share of Rufus' stock is closest to:

The total return of a stock is equal to

What are some common multiples used to value stocks?

Which of the following statements is false?

What are some implicit assumptions that are made when valuing a firm using multiples based on comparable firms?

The Sisyphean Company's common stock is currently trading for $25.00 per share.The stock is expected to pay a $2.50 dividend at the end of the year and the Sisyphean Company's equity cost of capital is 14%.If the dividend payout rate is expected to remain constant,then the expected growth rate in the Sisyphean Company's earnings is closest to:

Which of the following statements is false?

Which of the following statements is false?

Which of the following statements is false?

Which of the following statements is false?

Which of the following statements is false?

Which of the following statements is false?

Use the information for the question(s) below. Von Bora Corporation is expected pay a dividend of $1.40 per share at the end of this year and $1.50 per share at the end of the second year. You expect Von Bora's stock price to be $25.00 at the end of two years. Von Bora's equity cost of capital is 10%. -The price you would be willing to pay today for a share of Von Bora stock,if you plan to hold the stock for two years is closest to:

Use the information for the question(s) below. Von Bora Corporation is expected pay a dividend of $1.40 per share at the end of this year and $1.50 per share at the end of the second year. You expect Von Bora's stock price to be $25.00 at the end of two years. Von Bora's equity cost of capital is 10%. -Suppose you plan on purchasing Von Bora stock in one year,right after the $1.40 dividend is paid.You then plan on selling your stock at the end of year two,right after the $1.50 dividend is paid.The capital gain rate that you will receive on your investment is closest to:

Which of the following equations correctly defines Free Cash Flow?

Use the information for the question(s) below. Von Bora Corporation is expected pay a dividend of $1.40 per share at the end of this year and $1.50 per share at the end of the second year. You expect Von Bora's stock price to be $25.00 at the end of two years. Von Bora's equity cost of capital is 10%. -Suppose you plan to hold Von Bora stock for only one year.Your capital gain from holding Von Bora stock for the first year is closest to: