Question 1

At your full-service brokerage firm, it costs $120 per stock trade. How much money do you receive after selling 200 shares of Ralph Lauren (RL), which trades at $85.13?

Accepted Answer

A)  $16,546.00 
B)  $16,906.00 
C)  $17,026.00 
D)  $17,146.00 
A)  $16,546.00 
B)  $16,906.00 
C)  $17,026.00 
D)  $17,146.00

Question 2

At your discount brokerage firm, it costs $9.95 per stock trade. How much money do you need to buy 100 shares of Ralph Lauren (RL), which trades at $85.13?

Accepted Answer

A)  $8,503.05 
B)  $8,503.00 
C)  $8,522.95 
D)  $9,508.00 
A)  $8,503.05 
B)  $8,503.00 
C)  $8,522.95 
D)  $9,508.00

Question 3

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 4

At your discount brokerage firm, it costs $7.95 per stock trade. How much money do you receive after selling 250 shares of General Electric (GE), which trades at $55.19?

Accepted Answer

A)  $14,037.95 
B)  $11,958.55 
C)  $12,174.95 
D)  $13,789.55 
A)  $14,037.95 
B)  $11,958.55 
C)  $12,174.95 
D)  $13,789.55

Question 5

A firm is expected to pay a $4.00 dividend 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)  7.25 percent 
C)  5.91 percent 
D)  6.14 percent 
A)  4.73 percent 
B)  7.25 percent 
C)  5.91 percent 
D)  6.14 percent

Question 6

A firm does not pay a dividend. It is expected to pay its first dividend of $0.10 per share in two years. This dividend will grow at 11 percent indefinitely. Using a 13 percent discount rate, compute the value of this stock.

Accepted Answer

A)  $4.42 
B)  $4.59 
C)  $5.43 
D)  $7.21 
A)  $4.42 
B)  $4.59 
C)  $5.43 
D)  $7.21

Question 7

At your full-service brokerage firm, it costs $125 per stock trade. How much money do you receive after selling 200 shares of Time Warner, Inc. (TMX), which trades at $29.54?

Accepted Answer

A)  $5,783.00 
B)  $5,908.00 
C)  $6,033.00 
D)  $19,092.00 
A)  $5,783.00 
B)  $5,908.00 
C)  $6,033.00 
D)  $19,092.00

Question 8

When residual cash flows are high, stock values will be

Accepted Answer

A)  unchanged. 
B)  low. 
C)  high. 
D)  unpredictable. 
A)  unchanged. 
B)  low. 
C)  high. 
D)  unpredictable.

Question 9

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 10

Stock valuation model dynamics make clear that lower discount rates lead to

Accepted Answer

A)  lower valuations. 
B)  higher valuations. 
C)  lower growth rates. 
D)  higher growth rates. 
A)  lower valuations. 
B)  higher valuations. 
C)  lower growth rates. 
D)  higher growth rates.

Question 11

A firm is expected to pay a dividend of $3.00 next year and $3.21 the following year. Financial analysts believe the stock will be at their target price of $80.00 in two years. Compute the value of this stock with a required return of 13 percent.

Accepted Answer

A)  $50.00 
B)  $67.52 
C)  $67.82 
D)  $86.21 
A)  $50.00 
B)  $67.52 
C)  $67.82 
D)  $86.21

Question 12

You would like to sell 400 shares of International Business Machines (IBM). The current bid and ask quotes are $96.24 and $96.17, respectively. You place a limit sell-order at $96.20. If the trade executes, how much money do you receive from the buyer?

Accepted Answer

A)  $38,464.00 
B)  $38,468.00 
C)  $38,480.00 
D)  $38,496.00 
A)  $38,464.00 
B)  $38,468.00 
C)  $38,480.00 
D)  $38,496.00

Question 13

As residual claimants, which of these investors claim any cash flows to the firm that remain after the firm pays all other claims?

Accepted Answer

A)  creditors 
B)  bondholders 
C)  preferred stockholders 
D)  common stockholders 
A)  creditors 
B)  bondholders 
C)  preferred stockholders 
D)  common stockholders

Question 14

Pfizer, Inc. (PFE) has earnings per share of $2.09 and a P/E ratio of 11.02. What is the stock price?

Accepted Answer

A)  $0.19 
B)  $5.27 
C)  $18.97 
D)  $23.03 
A)  $0.19 
B)  $5.27 
C)  $18.97 
D)  $23.03

Question 15

Which of the following statements is incorrect?

Accepted Answer

A)  Trading at the New York Stock Exchange and the American Stock Exchange are done by open outcry. 
B)  Dealers create market liquidity in the Nasdaq's electronic market. 
C)  The Dow Jones Industrial Average includes 35 of the largest companies in the United States. 
D)  The Nasdaq contains many very large technology firms. 
A)  Trading at the New York Stock Exchange and the American Stock Exchange are done by open outcry. 
B)  Dealers create market liquidity in the Nasdaq's electronic market. 
C)  The Dow Jones Industrial Average includes 35 of the largest companies in the United States. 
D)  The Nasdaq contains many very large technology firms.

Question 16

Which of the following is incorrect with respect to limit orders?

Accepted Answer

A)  They can be used only to buy stock. 
B)  If the current quote does not meet the price cited in the limit order, the trade is not executed. 
C)  The advantage of the limit order is that the investor makes the trade at the desired price. 
D)  The disadvantage of the limit order is that the trade might not be executed at all. 
A)  They can be used only to buy stock. 
B)  If the current quote does not meet the price cited in the limit order, the trade is not executed. 
C)  The advantage of the limit order is that the investor makes the trade at the desired price. 
D)  The disadvantage of the limit order is that the trade might not be executed at all.

Question 17

A preferred stock from DLC pays $3.00 in annual dividends. If the required return on the preferred stock is 9.3 percent, what is the value of the stock?

Accepted Answer

A)  $34.89 
B)  $32.26 
C)  $38.49 
D)  $31.13 
A)  $34.89 
B)  $32.26 
C)  $38.49 
D)  $31.13

Question 18

Suppose that a firm's recent earnings per share and dividends per share are $5.00 and $1.00, respectively. Both are expected to grow at 5 percent. However, the firm's current P/E ratio of 18 seems high for this growth rate. The P/E ratio is expected to fall to 10 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 12 percent required rate.

Accepted Answer

A)  $32.51 
B)  $40.35 
C)  $50.00 
D)  $63.81 
A)  $32.51 
B)  $40.35 
C)  $50.00 
D)  $63.81

Question 19

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 20

A firm does not pay a dividend. It is expected to pay its first dividend of $1.00 per share in two years. This dividend will grow at 5 percent indefinitely. Using a 12 percent discount rate, compute the value of this stock.

Accepted Answer

A)  $12.76 
B)  $12.19 
C)  $11.96 
D)  $11.39 
A)  $12.76 
B)  $12.19 
C)  $11.96 
D)  $11.39

At your full-service brokerage firm, it costs $120 per stock trade. How much money do you receive after selling 200 shares of Ralph Lauren (RL), which trades at $85.13?

At your discount brokerage firm, it costs $9.95 per stock trade. How much money do you need to buy 100 shares of Ralph Lauren (RL), which trades at $85.13?

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?

At your discount brokerage firm, it costs $7.95 per stock trade. How much money do you receive after selling 250 shares of General Electric (GE), which trades at $55.19?

A firm is expected to pay a $4.00 dividend 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?

A firm does not pay a dividend. It is expected to pay its first dividend of $0.10 per share in two years. This dividend will grow at 11 percent indefinitely. Using a 13 percent discount rate, compute the value of this stock.

At your full-service brokerage firm, it costs $125 per stock trade. How much money do you receive after selling 200 shares of Time Warner, Inc. (TMX), which trades at $29.54?

When residual cash flows are high, stock values will be

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?

Stock valuation model dynamics make clear that lower discount rates lead to

A firm is expected to pay a dividend of $3.00 next year and $3.21 the following year. Financial analysts believe the stock will be at their target price of $80.00 in two years. Compute the value of this stock with a required return of 13 percent.

You would like to sell 400 shares of International Business Machines (IBM). The current bid and ask quotes are $96.24 and $96.17, respectively. You place a limit sell-order at $96.20. If the trade executes, how much money do you receive from the buyer?

As residual claimants, which of these investors claim any cash flows to the firm that remain after the firm pays all other claims?

Pfizer, Inc. (PFE) has earnings per share of $2.09 and a P/E ratio of 11.02. What is the stock price?

Which of the following statements is incorrect?

Which of the following is incorrect with respect to limit orders?

A preferred stock from DLC pays $3.00 in annual dividends. If the required return on the preferred stock is 9.3 percent, what is the value of the stock?

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

A firm does not pay a dividend. It is expected to pay its first dividend of $1.00 per share in two years. This dividend will grow at 5 percent indefinitely. Using a 12 percent discount rate, compute the value of this stock.

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

At your full-service brokerage firm, it costs $120 per stock trade. How much money do you receive after selling 200 shares of Ralph Lauren (RL), which trades at $85.13?

At your discount brokerage firm, it costs $9.95 per stock trade. How much money do you need to buy 100 shares of Ralph Lauren (RL), which trades at $85.13?

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?

At your discount brokerage firm, it costs $7.95 per stock trade. How much money do you receive after selling 250 shares of General Electric (GE), which trades at $55.19?

A firm is expected to pay a $4.00 dividend 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?

A firm does not pay a dividend. It is expected to pay its first dividend of $0.10 per share in two years. This dividend will grow at 11 percent indefinitely. Using a 13 percent discount rate, compute the value of this stock.

At your full-service brokerage firm, it costs $125 per stock trade. How much money do you receive after selling 200 shares of Time Warner, Inc. (TMX), which trades at $29.54?

When residual cash flows are high, stock values will be

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?

Stock valuation model dynamics make clear that lower discount rates lead to

A firm is expected to pay a dividend of $3.00 next year and $3.21 the following year. Financial analysts believe the stock will be at their target price of $80.00 in two years. Compute the value of this stock with a required return of 13 percent.

You would like to sell 400 shares of International Business Machines (IBM). The current bid and ask quotes are $96.24 and $96.17, respectively. You place a limit sell-order at $96.20. If the trade executes, how much money do you receive from the buyer?

As residual claimants, which of these investors claim any cash flows to the firm that remain after the firm pays all other claims?

Pfizer, Inc. (PFE) has earnings per share of $2.09 and a P/E ratio of 11.02. What is the stock price?

Which of the following statements is incorrect?

Which of the following is incorrect with respect to limit orders?

A preferred stock from DLC pays $3.00 in annual dividends. If the required return on the preferred stock is 9.3 percent, what is the value of the stock?

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

A firm does not pay a dividend. It is expected to pay its first dividend of $1.00 per share in two years. This dividend will grow at 5 percent indefinitely. Using a 12 percent discount rate, compute the value of this stock.

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