Exam 7: Stock Valuation

A prospectus is a portion of the security registration statement that describes the key aspects of the issue, the issuer, and its management and financial position.

The use of the ________ is especially helpful in valuing firms that are not publicly traded.

Treasury stock results from the

Cumulative preferred stocks are preferred stocks for which all passed (unpaid) dividends in arrears must be paid along with the current dividend prior to the payment of dividends to common stockholders.

A firm has experienced a constant annual rate of dividend growth of 9 percent on its common stock and expects the dividend per share in the coming year to be $2.70. The firm can earn 12 percent on similar risk involvements. The value of the firm's common stock is

Table 7.1 -Calculate the estimated dividend for 2004. (See Table 7.1)

The tax deductibility of interest lowers the cost of debt financing, thereby causing the cost of debt financing to be lower than the cost of equity financing.

In the case of liquidation, common stockholders are paid first, followed by preferred stockholders, followed by bondholders.

________ is the value of the firm's ownership in the event that all assets are sold for their exact accounting value and the proceeds remaining after paying all liabilities (including preferred stock) are divided among common stockholders.

A firm has the balance sheet accounts, common stock, and paid-in capital in excess of par, with values of $40,000 and $500,000, respectively. The firm has 40,000 common shares outstanding. If the firm had a par value of $1, the stock originally sold for

Unlike creditors, equity holders are owners of the firm.

Preferred stock is a special form of stock having a fixed periodic dividend that must be paid prior to payment of any interest to outstanding bonds.

BFG has current assets of $800,000, which can be liquidated at 90 percent of book value. Total liabilities, including preferred stock, equal $270,000. The firm has 15,000 shares of common stock outstanding. What is the liquidation value per share of common stock?

Treasury stock is generally reclassified as class B common stock and has voting rights.

The attempt by a non-management group to gain control of the management of a firm by soliciting a sufficient number of proxy votes is called

Following the theory of the "efficient market hypothesis" all of the following are true EXCEPT

The ________ is utilized to value preferred stock.

A firm has an expected dividend next year of $1.20 per share, a zero growth rate of dividends, and a required return of 10 percent. The value of a share of the firm's common stock is

Common stock can be either privately or publicly owned.

The claims of equity holders on the firm's income can not be paid until the claims of all creditors have been satisfied. But, the claims of the equity holders on the firm's assets have priority over the claims of creditors because the equity holders are the owners of the firm.