Question 1

Which one of the following is a type of equity security that has a fixed dividend and a priority status over other equity securities?

Accepted Answer

A) senior bond 
B) debenture 
C) warrant 
D) common stock 
E) preferred stock 
A) senior bond 
B) debenture 
C) warrant 
D) common stock 
E) preferred stock

Question 2

Jen's Fashions is growing quickly.Dividends are expected to grow at a 19 percent rate for the next 3 years, with the growth rate falling off to a constant 8 percent thereafter.The required return is 12 percent and the company just paid a $3.80 annual dividend.What is the current share price?

Accepted Answer

A) $128.96 
B) $131.11 
C) $135.95 
D) $148.87 
E) $152.20 
A) $128.96 
B) $131.11 
C) $135.95 
D) $148.87 
E) $152.20

Question 3

Sessler Manufacturers made two announcements concerning its common stock today.First, the company announced that the next annual dividend will be $1.75 a share.Secondly, all dividends after that will decrease by 1.5 percent annually.What is the maximum amount you should pay to purchase a share of this stock today if you require a 14 percent rate of return?

Accepted Answer

A) $11.29 
B) $12.64 
C) $13.27 
D) $14.00 
E) $14.21 
A) $11.29 
B) $12.64 
C) $13.27 
D) $14.00 
E) $14.21

Question 4

Dexter Metals, paid its first annual dividend yesterday in the amount of $0.18 a share.The company plans to double each annual dividend payment for the next 3 years.After that time, it plans to pay $1.25 a share for 2 years than then pay a constant dividend of $1.60 per share indefinitely.What is one share of this stock worth today if the market rate of return on similar securities is 10.24 percent?

Accepted Answer

A) $12.32 
B) $12.77 
C) $13.20 
D) $14.26 
E) $14.79 
A) $12.32 
B) $12.77 
C) $13.20 
D) $14.26 
E) $14.79

Question 5

Combined Communications is a new firm in a rapidly growing industry.The company is planning on increasing its annual dividend by 15 percent a year for the next 4 years and then decreasing the growth rate to 3.5 percent per year.The company just paid its annual dividend in the amount of $0.20 per share.What is the current value of one share of this stock if the required rate of return is 15.5 percent?

Accepted Answer

A) $1.82 
B) $2.04 
C) $2.49 
D) $2.71 
E) $3.05 
A) $1.82 
B) $2.04 
C) $2.49 
D) $2.71 
E) $3.05

Question 6

You want to purchase some shares of Green World stock but need a 15 percent rate of return to compensate for the perceived risk of such ownership.What is the maximum you are willing to spend per share to buy this stock if the company pays a constant $0.90 annual dividend per share?

Accepted Answer

A) $5.40 
B) $6.00 
C) $6.90 
D) $7.20 
E) $7.80 
A) $5.40 
B) $6.00 
C) $6.90 
D) $7.20 
E) $7.80

Question 7

The next dividend payment by Hillside Markets will be $2.35 per share.The dividends are anticipated to maintain a 4.5 percent growth rate forever.The stock currently sells for $65 per share.What is the dividend yield?

Accepted Answer

A) 3.20 percent 
B) 3.62 percent 
C) 3.81 percent 
D) 4.50 percent 
E) 4.81 percent 
A) 3.20 percent 
B) 3.62 percent 
C) 3.81 percent 
D) 4.50 percent 
E) 4.81 percent

Question 8

Atlas Mines has adopted a policy of increasing the annual dividend on its common stock at a constant rate of 2.75 percent annually.The firm just paid an annual dividend of $1.67.What will the dividend be six years from now?

Accepted Answer

A) $1.88 
B) $1.92 
C) $1.97 
D) $2.02 
E) $2.05 
A) $1.88 
B) $1.92 
C) $1.97 
D) $2.02 
E) $2.05

Question 9

Northern Gas recently paid a $2.80 annual dividend on its common stock.This dividend increases at an average rate of 3.8 percent per year.The stock is currently selling for $26.91 a share.What is the market rate of return?

Accepted Answer

A) 13.88 percent 
B) 14.03 percent 
C) 14.21 percent 
D) 14.37 percent 
E) 14.60 percent 
A) 13.88 percent 
B) 14.03 percent 
C) 14.21 percent 
D) 14.37 percent 
E) 14.60 percent

Question 10

Free Motion Enterprises paid a $2.20 per share annual dividend last week.Dividends are expected to increase by 3.75 percent annually.What is one share of this stock worth to you today if your required rate of return is 15 percent?

Accepted Answer

A) $19.06 
B) $19.30 
C) $19.56 
D) $20.29 
E) $20.59 
A) $19.06 
B) $19.30 
C) $19.56 
D) $20.29 
E) $20.59

Question 11

The owner of one of the 1,366 trading licenses for the NYSE is called a:

Accepted Answer

A) broker. 
B) member. 
C) agent. 
D) specialist. 
E) dealer. 
A) broker. 
B) member. 
C) agent. 
D) specialist. 
E) dealer.

Question 12

Beatrice Markets is expecting a period of intense growth and has decided to retain more of its earnings to help finance that growth.As a result, it is going to reduce its annual dividend by 30 percent a year for the next 2 years.After that, it will maintain a constant dividend of $2.50 a share.Last year, the company paid $3.60 as the annual dividend per share.What is the market value of this stock if the required rate of return is 14.5 percent?

Accepted Answer

A) $14.63 
B) $16.70 
C) $18.08 
D) $19.61 
E) $21.23 
A) $14.63 
B) $16.70 
C) $18.08 
D) $19.61 
E) $21.23

Question 13

Jefferson Mills just paid a dividend of $1.56 per share on its stock.The dividends are expected to grow at a constant rate of 8 percent per year, indefinitely.What will the price of this stock be in 7 years if investors require a 15 percent rate of return?

Accepted Answer

A) $28.18 
B) $32.04 
C) $37.46 
D) $41.25 
E) $43.33 
A) $28.18 
B) $32.04 
C) $37.46 
D) $41.25 
E) $43.33

Question 14

High Country Builders currently pays an annual dividend of $1.35 and plans on increasing that amount by 2.5 percent each year.Valley High Builders currently pays an annual dividend of $1.20 and plans on increasing its dividend by 3 percent annually.Given this information, you know for certain that the stock of High Country Builders' has a higher ______ than the stock of Valley High Builders.

Accepted Answer

A) market price. 
B) dividend yield. 
C) capital gains yield. 
D) total return. 
E) The answer cannot be determined based on the information provided. 
A) market price. 
B) dividend yield. 
C) capital gains yield. 
D) total return. 
E) The answer cannot be determined based on the information provided.

Question 15

A market maker who acts as a dealer in one or more securities on the floor of the NYSE is called a:

Accepted Answer

A) floor trader. 
B) floor post. 
C) specialist. 
D) floor broker. 
E) commission broker. 
A) floor trader. 
B) floor post. 
C) specialist. 
D) floor broker. 
E) commission broker.

Question 16

An individual on the floor of the NYSE who owns a trading license and buys and sells for his or her personal account is called a:

Accepted Answer

A) floor trader. 
B) exchange customer. 
C) specialist. 
D) floor broker. 
E) market maker. 
A) floor trader. 
B) exchange customer. 
C) specialist. 
D) floor broker. 
E) market maker.

Question 17

Denver Shoppes will pay an annual dividend of $1.46 a share next year with future dividends increasing by 4.2 percent annually.What is the market rate of return if the stock is currently selling for $42.10 a share?

Accepted Answer

A) 6.55 percent 
B) 7.13 percent 
C) 7.46 percent 
D) 7.67 percent 
E) 8.29 percent 
A) 6.55 percent 
B) 7.13 percent 
C) 7.46 percent 
D) 7.67 percent 
E) 8.29 percent

Question 18

Last year, Hansen Delivery paid an annual dividend of $3.20 per share.The company has been reducing the dividends by 10 percent annually.How much are you willing to pay to purchase stock in this company if your required rate of return is 13 percent?

Accepted Answer

A) $1.92 
B) $7.87 
C) $12.52 
D) $21.16 
E) $24.08 
A) $1.92 
B) $7.87 
C) $12.52 
D) $21.16 
E) $24.08

Question 19

Winter Time Adventures is going to pay an annual dividend of $2.86 a share on its common stock next year.This year, the company paid a dividend of $2.75 a share.The company adheres to a constant rate of growth dividend policy.What will one share of this common stock be worth five years from now if the applicable discount rate is 11.7 percent?

Accepted Answer

A) $43.45 
B) $43.87 
C) $44.15 
D) $45.19 
E) $47.00 
A) $43.45 
B) $43.87 
C) $44.15 
D) $45.19 
E) $47.00

Question 20

The current dividend yield on Clayton's Metals common stock is 3.2 percent.The company just paid a $1.48 annual dividend and announced plans to pay $1.54 next year.The dividend growth rate is expected to remain constant at the current level.What is the required rate of return on this stock?

Accepted Answer

A) 7.25 percent 
B) 7.82 percent 
C) 8.08 percent 
D) 8.39 percent 
E) 8.75 percent 
A) 7.25 percent 
B) 7.82 percent 
C) 8.08 percent 
D) 8.39 percent 
E) 8.75 percent

Which one of the following is a type of equity security that has a fixed dividend and a priority status over other equity securities?

Jen's Fashions is growing quickly.Dividends are expected to grow at a 19 percent rate for the next 3 years, with the growth rate falling off to a constant 8 percent thereafter.The required return is 12 percent and the company just paid a $3.80 annual dividend.What is the current share price?

You want to purchase some shares of Green World stock but need a 15 percent rate of return to compensate for the perceived risk of such ownership.What is the maximum you are willing to spend per share to buy this stock if the company pays a constant $0.90 annual dividend per share?

The next dividend payment by Hillside Markets will be $2.35 per share.The dividends are anticipated to maintain a 4.5 percent growth rate forever.The stock currently sells for $65 per share.What is the dividend yield?

Atlas Mines has adopted a policy of increasing the annual dividend on its common stock at a constant rate of 2.75 percent annually.The firm just paid an annual dividend of $1.67.What will the dividend be six years from now?

Northern Gas recently paid a $2.80 annual dividend on its common stock.This dividend increases at an average rate of 3.8 percent per year.The stock is currently selling for $26.91 a share.What is the market rate of return?

Free Motion Enterprises paid a $2.20 per share annual dividend last week.Dividends are expected to increase by 3.75 percent annually.What is one share of this stock worth to you today if your required rate of return is 15 percent?

The owner of one of the 1,366 trading licenses for the NYSE is called a:

Jefferson Mills just paid a dividend of $1.56 per share on its stock.The dividends are expected to grow at a constant rate of 8 percent per year, indefinitely.What will the price of this stock be in 7 years if investors require a 15 percent rate of return?

A market maker who acts as a dealer in one or more securities on the floor of the NYSE is called a:

An individual on the floor of the NYSE who owns a trading license and buys and sells for his or her personal account is called a:

Denver Shoppes will pay an annual dividend of $1.46 a share next year with future dividends increasing by 4.2 percent annually.What is the market rate of return if the stock is currently selling for $42.10 a share?

Last year, Hansen Delivery paid an annual dividend of $3.20 per share.The company has been reducing the dividends by 10 percent annually.How much are you willing to pay to purchase stock in this company if your required rate of return is 13 percent?

The current dividend yield on Clayton's Metals common stock is 3.2 percent.The company just paid a $1.48 annual dividend and announced plans to pay $1.54 next year.The dividend growth rate is expected to remain constant at the current level.What is the required rate of return on this stock?

Introduction to Corporate Finance

Corporate Governance

Financial Statement Analysis

Introduction to Valuation: the Time Value of Money

Discounted Cash Flow Valuation

Bond Valuation

Equity Valuation

Making Capital Investment Decisions

Project Analysis and Evaluation

Some Lessons From Recent Capital Market History

Return, Risk and the Security Market

Cost of Capital

Raising Capital

Financial Leverage and Capital Structure Policy

Dividends and Payout Policy

Short-Term Financial Planning and Management

International Corporate Finance

Behavioural Finance

Financial Risk Management

Options and Corporate Finance

Filters

Exam 8: Net Present Value and Other Investment Criteria

Which one of the following is a type of equity security that has a fixed dividend and a priority status over other equity securities?

Jen's Fashions is growing quickly.Dividends are expected to grow at a 19 percent rate for the next 3 years, with the growth rate falling off to a constant 8 percent thereafter.The required return is 12 percent and the company just paid a $3.80 annual dividend.What is the current share price?

You want to purchase some shares of Green World stock but need a 15 percent rate of return to compensate for the perceived risk of such ownership.What is the maximum you are willing to spend per share to buy this stock if the company pays a constant $0.90 annual dividend per share?

The next dividend payment by Hillside Markets will be $2.35 per share.The dividends are anticipated to maintain a 4.5 percent growth rate forever.The stock currently sells for $65 per share.What is the dividend yield?

Atlas Mines has adopted a policy of increasing the annual dividend on its common stock at a constant rate of 2.75 percent annually.The firm just paid an annual dividend of $1.67.What will the dividend be six years from now?

Northern Gas recently paid a $2.80 annual dividend on its common stock.This dividend increases at an average rate of 3.8 percent per year.The stock is currently selling for $26.91 a share.What is the market rate of return?

Free Motion Enterprises paid a $2.20 per share annual dividend last week.Dividends are expected to increase by 3.75 percent annually.What is one share of this stock worth to you today if your required rate of return is 15 percent?

The owner of one of the 1,366 trading licenses for the NYSE is called a:

Jefferson Mills just paid a dividend of $1.56 per share on its stock.The dividends are expected to grow at a constant rate of 8 percent per year, indefinitely.What will the price of this stock be in 7 years if investors require a 15 percent rate of return?

A market maker who acts as a dealer in one or more securities on the floor of the NYSE is called a:

An individual on the floor of the NYSE who owns a trading license and buys and sells for his or her personal account is called a:

Denver Shoppes will pay an annual dividend of $1.46 a share next year with future dividends increasing by 4.2 percent annually.What is the market rate of return if the stock is currently selling for $42.10 a share?

Last year, Hansen Delivery paid an annual dividend of $3.20 per share.The company has been reducing the dividends by 10 percent annually.How much are you willing to pay to purchase stock in this company if your required rate of return is 13 percent?

The current dividend yield on Clayton's Metals common stock is 3.2 percent.The company just paid a $1.48 annual dividend and announced plans to pay $1.54 next year.The dividend growth rate is expected to remain constant at the current level.What is the required rate of return on this stock?

Introduction to Corporate Finance

Corporate Governance

Financial Statement Analysis

Introduction to Valuation: the Time Value of Money

Discounted Cash Flow Valuation

Bond Valuation

Equity Valuation

Making Capital Investment Decisions

Project Analysis and Evaluation

Some Lessons From Recent Capital Market History

Return, Risk and the Security Market

Cost of Capital

Raising Capital

Financial Leverage and Capital Structure Policy

Dividends and Payout Policy

Short-Term Financial Planning and Management

International Corporate Finance

Behavioural Finance

Financial Risk Management

Options and Corporate Finance

Filters