Question 1

Which of the following exchanges has the strictest listing requirements?

Accepted Answer

A) AMEX 
B) Nasdaq 
C) NYSE 
D) OTC 
A) AMEX 
B) Nasdaq 
C) NYSE 
D) OTC

Question 2

Solitron Manufacturing Company preferred stock is selling for $14.If it has a yearly dividend of $1,what is your expected rate of return if you purchase the stock at its market price (round your answer to the nearest .1%,and assume no transaction costs)?

Accepted Answer

A) 25.0% 
B) 14.2% 
C) 7.1% 
D) 9.3% 
A) 25.0% 
B) 14.2% 
C) 7.1% 
D) 9.3%

Question 3

Home Depot stock is currently selling for $30 per share.Next year's dividend is expected to be $1.00;next year's earnings per share are expected to be $2.14.Home Depot's P/E ratio is:

Accepted Answer

A) .07. 
B) 14. 
C) 2.14. 
D) 30. 
A) .07. 
B) 14. 
C) 2.14. 
D) 30.

Question 4

A share of common stock just paid a dividend of $3.25 per share.The expected long-run growth rate for this stock is 18%.If investors require a rate of return of 24%,what should the price of the stock be?

Accepted Answer

A) $57.51 
B) $62.25 
C) $71.86 
D) $63.92 
E) $44.94 
A) $57.51 
B) $62.25 
C) $71.86 
D) $63.92 
E) $44.94

Question 5

Horizon Communications stock pays a fixed annual dividend of of $3.00.Because of lower inflation,the market's required yield on this preferred stock has gone from 12% to 10%.As a result:

Accepted Answer

A) Horizon's dividend decreased by 6 cents. 
B) The value of Horizon's preferred increased by $3.00. 
C) The value of Horizon's preferred decreased by $5.00. 
D) The value of Horizon's preferred increased by $5.00. 
A) Horizon's dividend decreased by 6 cents. 
B) The value of Horizon's preferred increased by $3.00. 
C) The value of Horizon's preferred decreased by $5.00. 
D) The value of Horizon's preferred increased by $5.00.

Question 6

Large,established technology companies such as Apple,Dell,Intel and Microsoft all trade on the NYSE.

Accepted Answer

A) True 
 B)False

Question 7

The XYZ Company,whose common stock is currently selling for $40 per share,is expected to pay a $2.00 dividend in the coming year.If investors believe that the expected rate of return on XYZ is 14%,what growth rate in dividends must be expected?

Accepted Answer

A) 5% 
B) 14% 
C) 9% 
D) 6% 
A) 5% 
B) 14% 
C) 9% 
D) 6%

Question 8

In order to determine the value of a share of preferred stock,the discount rate used is the annual dividend percent.

Accepted Answer

A) True 
 B)False

Question 9

The shareholder can cast all votes for a single candidate or split them among various candidates through:

Accepted Answer

A) proxy fights. 
B) cumulative voting. 
C) call provisions. 
D) majority voting. 
A) proxy fights. 
B) cumulative voting. 
C) call provisions. 
D) majority voting.

Question 10

An issue of preferred stock currently sells for $52.50 per share and pays a constant annual expected dividend of $2.25 per share.The expected return on this security is:

Accepted Answer

A) 4.29%. 
B) 0.04%. 
C) 8.33%. 
D) 13.33%. 
A) 4.29%. 
B) 0.04%. 
C) 8.33%. 
D) 13.33%.

Question 11

Which of the following provisions is unique to preferred stockholders and usually NOT available to common stockholders?

Accepted Answer

A) Cumulative dividends feature 
B) Voting rights 
C) Fixed dividend 
D) Both A and C 
A) Cumulative dividends feature 
B) Voting rights 
C) Fixed dividend 
D) Both A and C

Question 12

The growth rate of future earnings is determined by return on equity and the profit-retention rate.

Accepted Answer

A) True 
 B)False

Question 13

Acme Consolidated has a return on equity of 12%.If Acme distributes 60% of earnings as dividends,then we would expect the common shareholders' investment in the firm and the value of the common stock to grow by:

Accepted Answer

A) 4.80%. 
B) 7.20%. 
C) 12%. 
D) 6%. 
A) 4.80%. 
B) 7.20%. 
C) 12%. 
D) 6%.

Question 14

In addition to stocks in individual companies,the AMEX conducts trading in such securities as ETFs and options.

Accepted Answer

A) True 
 B)False

Question 15

Stock valuation is more precise than bond valuation as stock cash flows are more certain.

Accepted Answer

A) True 
 B)False

Question 16

Common stockholders are essentially creditors of the firm.

Accepted Answer

A) True 
 B)False

Question 17

The expected rate of return implied by a given market price equals the required rate of return for investors at the margin.

Accepted Answer

A) True 
 B)False

Question 18

The AMEX specializes in relatively small,new technology companies.

Accepted Answer

A) True 
 B)False

Question 19

You can purchase one share of Sumter Company common stock for $80 today.You expect the price of the common stock to increase to $85 per share in one year.The company pays an annual dividend of $3.00 per share.What is your expected rate of return for Sumter stock?

Accepted Answer

$80.00 = @#IMG-DLM& 
+ @#IMG-DLM& 
$80.0

Question 20

If the ROE on a new investment is less than the firm's required rate of return:

Accepted Answer

A) the investment increases the firm's value. 
B) the investment leaves the firm's value unchanged. 
C) the effect on the firm's value is unpredictable. 
D) the investment reduces the firm's value. 
A) the investment increases the firm's value. 
B) the investment leaves the firm's value unchanged. 
C) the effect on the firm's value is unpredictable. 
D) the investment reduces the firm's value.

Which of the following exchanges has the strictest listing requirements?

Solitron Manufacturing Company preferred stock is selling for $14.If it has a yearly dividend of $1,what is your expected rate of return if you purchase the stock at its market price (round your answer to the nearest .1%,and assume no transaction costs)?

Home Depot stock is currently selling for $30 per share.Next year's dividend is expected to be $1.00;next year's earnings per share are expected to be $2.14.Home Depot's P/E ratio is:

A share of common stock just paid a dividend of $3.25 per share.The expected long-run growth rate for this stock is 18%.If investors require a rate of return of 24%,what should the price of the stock be?

Horizon Communications stock pays a fixed annual dividend of of $3.00.Because of lower inflation,the market's required yield on this preferred stock has gone from 12% to 10%.As a result:

Large,established technology companies such as Apple,Dell,Intel and Microsoft all trade on the NYSE.

The XYZ Company,whose common stock is currently selling for $40 per share,is expected to pay a $2.00 dividend in the coming year.If investors believe that the expected rate of return on XYZ is 14%,what growth rate in dividends must be expected?

In order to determine the value of a share of preferred stock,the discount rate used is the annual dividend percent.

The shareholder can cast all votes for a single candidate or split them among various candidates through:

An issue of preferred stock currently sells for $52.50 per share and pays a constant annual expected dividend of $2.25 per share.The expected return on this security is:

Which of the following provisions is unique to preferred stockholders and usually NOT available to common stockholders?

The growth rate of future earnings is determined by return on equity and the profit-retention rate.

Acme Consolidated has a return on equity of 12%.If Acme distributes 60% of earnings as dividends,then we would expect the common shareholders' investment in the firm and the value of the common stock to grow by:

In addition to stocks in individual companies,the AMEX conducts trading in such securities as ETFs and options.

Stock valuation is more precise than bond valuation as stock cash flows are more certain.

Common stockholders are essentially creditors of the firm.

The expected rate of return implied by a given market price equals the required rate of return for investors at the margin.

The AMEX specializes in relatively small,new technology companies.

You can purchase one share of Sumter Company common stock for $80 today.You expect the price of the common stock to increase to $85 per share in one year.The company pays an annual dividend of $3.00 per share.What is your expected rate of return for Sumter stock?

If the ROE on a new investment is less than the firm's required rate of return:

Getting Started-Principles of Finance

Firms and the Financial Market

Understanding Financial Statements, taxes, and Cash Flows

Financial Analysis-Sizing up Firm Performance

Time Value of Money-The Basics

The Time Value of Money-Annuities and Other Topics

An Introduction to Risk and Return-History of Financial Market Returns

Risk and Return-Capital Market Theory

Debt Valuation and Interest Rates

Investment Decision Criteria

Analyzing Project Cash Flows

Risk Analysis and Project Evaluation

The Cost of Capital

Capital Structure Policy

Dividend Policy

Financial Forecasting and Planning

Working Capital Management

International Business Finance

Corporate Risk Management

Filters

Exam 10: Stock Valuation

Which of the following exchanges has the strictest listing requirements?

Solitron Manufacturing Company preferred stock is selling for $14.If it has a yearly dividend of $1,what is your expected rate of return if you purchase the stock at its market price (round your answer to the nearest .1%,and assume no transaction costs)?

Home Depot stock is currently selling for $30 per share.Next year's dividend is expected to be $1.00;next year's earnings per share are expected to be $2.14.Home Depot's P/E ratio is:

A share of common stock just paid a dividend of $3.25 per share.The expected long-run growth rate for this stock is 18%.If investors require a rate of return of 24%,what should the price of the stock be?

Horizon Communications stock pays a fixed annual dividend of of $3.00.Because of lower inflation,the market's required yield on this preferred stock has gone from 12% to 10%.As a result:

Large,established technology companies such as Apple,Dell,Intel and Microsoft all trade on the NYSE.

The XYZ Company,whose common stock is currently selling for $40 per share,is expected to pay a $2.00 dividend in the coming year.If investors believe that the expected rate of return on XYZ is 14%,what growth rate in dividends must be expected?

In order to determine the value of a share of preferred stock,the discount rate used is the annual dividend percent.

The shareholder can cast all votes for a single candidate or split them among various candidates through:

An issue of preferred stock currently sells for $52.50 per share and pays a constant annual expected dividend of $2.25 per share.The expected return on this security is:

Which of the following provisions is unique to preferred stockholders and usually NOT available to common stockholders?

The growth rate of future earnings is determined by return on equity and the profit-retention rate.

Acme Consolidated has a return on equity of 12%.If Acme distributes 60% of earnings as dividends,then we would expect the common shareholders' investment in the firm and the value of the common stock to grow by:

In addition to stocks in individual companies,the AMEX conducts trading in such securities as ETFs and options.

Stock valuation is more precise than bond valuation as stock cash flows are more certain.

Common stockholders are essentially creditors of the firm.

The expected rate of return implied by a given market price equals the required rate of return for investors at the margin.

The AMEX specializes in relatively small,new technology companies.

You can purchase one share of Sumter Company common stock for $80 today.You expect the price of the common stock to increase to $85 per share in one year.The company pays an annual dividend of $3.00 per share.What is your expected rate of return for Sumter stock?

If the ROE on a new investment is less than the firm's required rate of return:

Getting Started-Principles of Finance

Firms and the Financial Market

Understanding Financial Statements, taxes, and Cash Flows

Financial Analysis-Sizing up Firm Performance

Time Value of Money-The Basics

The Time Value of Money-Annuities and Other Topics

An Introduction to Risk and Return-History of Financial Market Returns

Risk and Return-Capital Market Theory

Debt Valuation and Interest Rates

Investment Decision Criteria

Analyzing Project Cash Flows

Risk Analysis and Project Evaluation

The Cost of Capital

Capital Structure Policy

Dividend Policy

Financial Forecasting and Planning

Working Capital Management

International Business Finance

Corporate Risk Management

Filters