Question 1

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 2

Value of Future Cash Flows 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 3

JPM has earnings per share of $3.75 and P/E of 47.What is the stock price?

Accepted Answer

A) $174.08 
B) $176.25 
C) $185.95 
D) $112.98 
A) $174.08 
B) $176.25 
C) $185.95 
D) $112.98

Question 4

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 5

ABC has a net profit margin of 3.3 percent on Sales of $10,000,000.The firm has 50,000 shares outstanding.If the firm's P/E is 19 times,how much is the stock selling for?

Accepted Answer

A) $41.72 
B) $34.96 
C) $125.40 
D) $99.16 
A) $41.72 
B) $34.96 
C) $125.40 
D) $99.16

Question 6

Stock Index Performance 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 7

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 8

Expected Return 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 9

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 10

Changes in Growth and Stock Valuation 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 11

Selling Stock with a Limit Order You would like to sell 100 shares of Pfizer,Inc.(PFE).The current bid and ask quotes are $27.22 and $27.25,respectively.You place a limit sell-order at $27.24.If the trade executes,how much money do you receive from the buyer?

Accepted Answer

A) $2,722.00 
B) $2,724.00 
C) $2,725.00 
D) $5,446.00 
A) $2,722.00 
B) $2,724.00 
C) $2,725.00 
D) $5,446.00

Question 12

When will a limit order be executed?

Accepted Answer

A limit order will only be exe

Question 13

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 14

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 15

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 16

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 17

Constant Growth Stock Valuation Target Corp.(TGT)paid a $0.21 dividend per share in 2000,which grew to $0.52 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 14.77 percent?

Accepted Answer

A) $3.52 
B) $55.32 
C) $62.97 
D) $63.49 
A) $3.52 
B) $55.32 
C) $62.97 
D) $63.49

Question 18

P/E Model and Cash Flow Valuation Suppose that a firm's recent earnings per share and dividends per share are $2.50 and $1.00,respectively.Both are expected to grow at 10 percent.However,the firm's current P/E ratio of 22 seems high for this growth rate.The P/E ratio is expected to fall to 18 within five years.Compute a value for this stock by first estimating the dividends over the next five years and the stock price in five years.Then discount these cash flows using a 14 percent required rate.

Accepted Answer

A) $37.51 
B) $37.64 
C) $42.14 
D) $72.47 
A) $37.51 
B) $37.64 
C) $42.14 
D) $72.47

Question 19

A firm recently paid a $0.50 annual dividend.The dividend is expected to increase by 10 percent in each of the next three years.In the third year,the stock price is expected to be $110.If the required return is 15 percent,what is its value?

Accepted Answer

A) $62.53 
B) $68.95 
C) $73.71 
D) $78.67 
A) $62.53 
B) $68.95 
C) $73.71 
D) $78.67

Question 20

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

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:

Value of Future Cash Flows 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?

JPM has earnings per share of $3.75 and P/E of 47.What is the stock price?

Which of the following statements is incorrect?

ABC has a net profit margin of 3.3 percent on Sales of $10,000,000.The firm has 50,000 shares outstanding.If the firm's P/E is 19 times,how much is the stock selling for?

Stock Index Performance 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?

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?

Expected Return 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?

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?

Selling Stock with a Limit Order You would like to sell 100 shares of Pfizer,Inc.(PFE).The current bid and ask quotes are $27.22 and $27.25,respectively.You place a limit sell-order at $27.24.If the trade executes,how much money do you receive from the buyer?

When will a limit order be executed?

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

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

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?

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?

Constant Growth Stock Valuation Target Corp.(TGT)paid a $0.21 dividend per share in 2000,which grew to $0.52 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 14.77 percent?

A firm recently paid a $0.50 annual dividend.The dividend is expected to increase by 10 percent in each of the next three years.In the third year,the stock price is expected to be $110.If the required return is 15 percent,what is its value?

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?

Introduction to Financial Management

Reviewing Financial Statements

Analyzing Financial Statements

Time Value of Money

Time Value of Money

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 and Policies

Financial Planning and Forecasting

Assessing Long-Term Debt, equity, and Capital Structure

Sharing Firm Wealth: Dividends, share Repurchases and Other Payouts

Issuing Capital and the Investment Banking Process

International Corporate Finance

Mergers and Acquisitions and Financial Distress

Filters

Exam 8: Valuing Stockspart

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:

Value of Future Cash Flows 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?

JPM has earnings per share of $3.75 and P/E of 47.What is the stock price?

Which of the following statements is incorrect?

ABC has a net profit margin of 3.3 percent on Sales of $10,000,000.The firm has 50,000 shares outstanding.If the firm's P/E is 19 times,how much is the stock selling for?

Stock Index Performance 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?

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?

Expected Return 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?

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?

Selling Stock with a Limit Order You would like to sell 100 shares of Pfizer,Inc.(PFE).The current bid and ask quotes are $27.22 and $27.25,respectively.You place a limit sell-order at $27.24.If the trade executes,how much money do you receive from the buyer?

When will a limit order be executed?

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

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

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?

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?

Constant Growth Stock Valuation Target Corp.(TGT)paid a $0.21 dividend per share in 2000,which grew to $0.52 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 14.77 percent?

A firm recently paid a $0.50 annual dividend.The dividend is expected to increase by 10 percent in each of the next three years.In the third year,the stock price is expected to be $110.If the required return is 15 percent,what is its value?

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?

Introduction to Financial Management

Reviewing Financial Statements

Analyzing Financial Statements

Time Value of Money

Time Value of Money

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 and Policies

Financial Planning and Forecasting

Assessing Long-Term Debt, equity, and Capital Structure

Sharing Firm Wealth: Dividends, share Repurchases and Other Payouts

Issuing Capital and the Investment Banking Process

International Corporate Finance

Mergers and Acquisitions and Financial Distress

Filters