Question 1

An increase in PVGO will almost always coincide with a decrease in dividends.

Accepted Answer

A) True 
 B)False

Question 2

Dividend growth rate for a stable firm can be estimated as:

Accepted Answer

A)  Plow back rate/the return on equity (RO
E)  
B)  Plow back rate * the return on equity (RO
E)  
C)  Plow back rate + the return on equity (RO
E)  
D)  Plow back rate - the return on equity (RO
E)

Question 3

World-Tour Co. has just now paid a dividend of $2.83 per share (D0); the dividends are expected to grow at a constant rate of 6% per year forever. If the required rate of return on the stock is 16%, what is the current value on stock, after paying the dividend?

Accepted Answer

A)  $30 
B)  $56 
C)  $70 
D)  $48

Question 4

Michigan Co. is currently paying a dividend of $2.00 per share. The dividends are expected to grow at 20% per year for the next four years and then grow 6% per year thereafter. Calculate the expected dividend in year 5.

Accepted Answer

A)  $4.15 
B)  $2.95 
C)  $4.40 
D)  $3.81

Question 5

If the Wall Street Journal Quotation for a company has the following values close: 55.14; Net chg: = + 1.04; then the closing price for the stock for the previous trading day was?

Accepted Answer

A)  $56.18 
B)  $54.10 
C)  $55.66 
D)  None of the above.

Question 6

The following are foreign companies that are traded on the New York Stock Exchange:
I. Toyota, II) Brasil Telecom,
III. Nokia,
IV. Endesa, V) General Electric

Accepted Answer

A)  I, II and III only 
B)  I,II, III and IV only 
C)  I,II,III and V only 
D)  All of the given companies are foreign companies

Question 7

The New York Stock Exchange is the only stock market in the US.

Accepted Answer

A) True 
 B)False

Exam 4: The Value of Common Stocks

An increase in PVGO will almost always coincide with a decrease in dividends.

Dividend growth rate for a stable firm can be estimated as:

World-Tour Co. has just now paid a dividend of $2.83 per share (D0) ; the dividends are expected to grow at a constant rate of 6% per year forever. If the required rate of return on the stock is 16%, what is the current value on stock, after paying the dividend?

Michigan Co. is currently paying a dividend of $2.00 per share. The dividends are expected to grow at 20% per year for the next four years and then grow 6% per year thereafter. Calculate the expected dividend in year 5.

If the Wall Street Journal Quotation for a company has the following values close: 55.14; Net chg: = + 1.04; then the closing price for the stock for the previous trading day was?

The following are foreign companies that are traded on the New York Stock Exchange: I. Toyota, II) Brasil Telecom, III. Nokia, IV. Endesa, V) General Electric

The New York Stock Exchange is the only stock market in the US.