Question 1

Ralph Lauren (RL) has earnings per share of $3.85 and a P/E ratio of 17.37. What is the stock price?

Accepted Answer

A)  $0.22 
B)  $4.51 
C)  $22.16 
D)  $66.87 
A)  $0.22 
B)  $4.51 
C)  $22.16 
D)  $66.87

Question 2

Which of the following characteristics describe the NASDAQ stock market?

Accepted Answer

A)  is an electronic stock market without a physical trading floor. 
B)  ranks second behind the NYSE in terms of total dollar value. 
C)  lists approximately 3,900 domestic and foreign companies. 
D)  All of the above. 
A)  is an electronic stock market without a physical trading floor. 
B)  ranks second behind the NYSE in terms of total dollar value. 
C)  lists approximately 3,900 domestic and foreign companies. 
D)  All of the above.

Question 3

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 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 4

JUJU's dividend next year is expected to be $5.50. It is trading at $45 and is expected to grow at 4 percent per year. What is JUJU's dividend yield and capital gain?

Accepted Answer

A)  2.5 percent; 6 percent 
B)  12.22 percent; 4 percent 
C)  4 percent; 12.22 percent 
D)  6 percent; 2.5 percent 
A)  2.5 percent; 6 percent 
B)  12.22 percent; 4 percent 
C)  4 percent; 12.22 percent 
D)  6 percent; 2.5 percent

Question 5

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 6

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

Question 7

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 the options. 
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 the options.

Question 8

A firm recently paid a $1.00 annual dividend. The dividend is expected to increase by 10 percent in each of the next four years. In the fourth year, the stock price is expected to be $100. If the required rate for this stock is 14 percent, what is its value?

Accepted Answer

A)  $25.00 
B)  $36.60 
C)  $62.87 
D)  $72.30 
A)  $25.00 
B)  $36.60 
C)  $62.87 
D)  $72.30

Question 9

The Buckle (BKE) recently paid a $0.90 dividend. The dividend is expected to grow at a 19 percent rate. At the current stock price of $43.17, what is the return shareholders are expecting?

Accepted Answer

A)  19.00 percent 
B)  19.02 percent 
C)  21.48 percent 
D)  22.74 percent 
A)  19.00 percent 
B)  19.02 percent 
C)  21.48 percent 
D)  22.74 percent

Question 10

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 11

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 12

If a preferred stock from Ecology and Environment, Inc. (EEI) pays $2.50 in annual dividends, and the required return on the preferred stock is 5.8 percent, what's the value of the stock?

Accepted Answer

A)  $0.15 
B)  $0.43 
C)  $14.50 
D)  $43.10 
A)  $0.15 
B)  $0.43 
C)  $14.50 
D)  $43.10

Question 13

A firm's stock is selling at $95.00 per share. Its growth rate is 10 percent and investors demand 15 percent on this stock. What is the firm's expected dividend?

Accepted Answer

A)  $4.75 
B)  $5.95 
C)  $6.25 
D)  $5.50 
A)  $4.75 
B)  $5.95 
C)  $6.25 
D)  $5.50

Question 14

Investors sell stock at the

Accepted Answer

A)  dealer price. 
B)  bid price. 
C)  quoted ask price. 
D)  broker price. 
A)  dealer price. 
B)  bid price. 
C)  quoted ask price. 
D)  broker price.

Question 15

A firm does not pay a dividend. It is expected to pay its first dividend of $0.15 per share in three years. This dividend will grow at 9 percent indefinitely. Using a 10 percent discount rate, compute the value of this stock.

Accepted Answer

A)  $12.28 
B)  $12.40 
C)  $16.35 
D)  $16.50 
A)  $12.28 
B)  $12.40 
C)  $16.35 
D)  $16.50

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 buyer 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 buyer achieves. 
D)  It represents the gain all participants will achieve.

Question 17

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 18

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 19

A firm is expected to pay a dividend of $2.00 next year and $3.75 the following year. Financial analysts believe the stock will be at their price target of $125.00 in two years. Compute the value of this stock with a required rate of return of 15 percent.

Accepted Answer

A)  $78.34 
B)  $81.05 
C)  $87.13 
D)  $99.09 
A)  $78.34 
B)  $81.05 
C)  $87.13 
D)  $99.09

Question 20

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

Ralph Lauren (RL) has earnings per share of $3.85 and a P/E ratio of 17.37. What is the stock price?

Which of the following characteristics describe the NASDAQ stock market?

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 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?

JUJU's dividend next year is expected to be $5.50. It is trading at $45 and is expected to grow at 4 percent per year. What is JUJU's dividend yield and capital gain?

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?

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?

Value stocks are

A firm recently paid a $1.00 annual dividend. The dividend is expected to increase by 10 percent in each of the next four years. In the fourth year, the stock price is expected to be $100. If the required rate for this stock is 14 percent, what is its value?

The Buckle (BKE) recently paid a $0.90 dividend. The dividend is expected to grow at a 19 percent rate. At the current stock price of $43.17, what is the return shareholders are expecting?

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

If a preferred stock from Ecology and Environment, Inc. (EEI) pays $2.50 in annual dividends, and the required return on the preferred stock is 5.8 percent, what's the value of the stock?

A firm's stock is selling at $95.00 per share. Its growth rate is 10 percent and investors demand 15 percent on this stock. What is the firm's expected dividend?

Investors sell stock at the

A firm does not pay a dividend. It is expected to pay its first dividend of $0.15 per share in three years. This dividend will grow at 9 percent indefinitely. Using a 10 percent discount rate, compute the value of this stock.

Why is the ask price higher than the bid price?

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?

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

A firm is expected to pay a dividend of $2.00 next year and $3.75 the following year. Financial analysts believe the stock will be at their price target of $125.00 in two years. Compute the value of this stock with a required rate of return of 15 percent.

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?

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

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 Stocks

Ralph Lauren (RL) has earnings per share of $3.85 and a P/E ratio of 17.37. What is the stock price?

Which of the following characteristics describe the NASDAQ stock market?

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 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?

JUJU's dividend next year is expected to be $5.50. It is trading at $45 and is expected to grow at 4 percent per year. What is JUJU's dividend yield and capital gain?

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?

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?

Value stocks are

A firm recently paid a $1.00 annual dividend. The dividend is expected to increase by 10 percent in each of the next four years. In the fourth year, the stock price is expected to be $100. If the required rate for this stock is 14 percent, what is its value?

The Buckle (BKE) recently paid a $0.90 dividend. The dividend is expected to grow at a 19 percent rate. At the current stock price of $43.17, what is the return shareholders are expecting?

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

If a preferred stock from Ecology and Environment, Inc. (EEI) pays $2.50 in annual dividends, and the required return on the preferred stock is 5.8 percent, what's the value of the stock?

A firm's stock is selling at $95.00 per share. Its growth rate is 10 percent and investors demand 15 percent on this stock. What is the firm's expected dividend?

Investors sell stock at the

A firm does not pay a dividend. It is expected to pay its first dividend of $0.15 per share in three years. This dividend will grow at 9 percent indefinitely. Using a 10 percent discount rate, compute the value of this stock.

Why is the ask price higher than the bid price?

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?

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

A firm is expected to pay a dividend of $2.00 next year and $3.75 the following year. Financial analysts believe the stock will be at their price target of $125.00 in two years. Compute the value of this stock with a required rate of return of 15 percent.

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?

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

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