Question 1

TMS just paid an annual dividend of $2.84 per share on its stock.The dividends are expected to grow at a constant rate of 1.85 percent per year.If investors require a rate of return of 10.4 percent, what will be the stock price be in Year 11?

Accepted Answer

The answer of TMS just paid an annual dividend of...

Question 2

Juniper Trees has earnings per share of $1.38, all of which is added to retained earnings.What is the value of a share of its stock if the PE ratio is 9.8 and market-to-book ratio is 2.5?

Accepted Answer

The correct answer is A because the PE ratio is 9.8, so the value of a share of stock is $1.38 * 9.8 = $13.52.

Question 3

Laura owns 6,700 shares of GP Global stock worth $92,460.The firm has 15,000 shares outstanding.Each share is entitled to one vote under the straight voting policy of the firm.The next election is in four months at which time four directors are up for election.How much more must Laura invest in this firm to guarantee her election to the board?

Accepted Answer

The answer of Laura owns 6,700 shares of GP Global...

Question 4

KIT Kars stock currently sells for $54.10 per share and has a fixed 2.5 percent dividend growth rate.What was the amount of the last dividend paid if the required rate of return is 11 percent?

Accepted Answer

The correct answer is A because the last dividend paid is $4.49. This can be calculated using the formula: Last dividend = Current dividend / (1 + growth rate) ^ number of years. In this case, the current dividend is $54.10 * 0.025 = $1.3525, the growth rate is 2.5%, and the number of years is 1. Therefore, the last dividend paid is $1.3525 / (1 + 0.025) ^ 1 = $4.49.

Question 5

JL Tools is a young start-up company.The company expects to pay its first dividend of $.20 a share in Year 6 with annual dividend increases of 1.5 percent thereafter.At a required return of 12 percent, what is the current share price?

Accepted Answer

The answer of JL Tools is a young start-up company.The...

Question 6

Russell Foods pays a fixed annual dividend of $2.28 a share.At a required return of 11.5 percent, the stock is valued at $43.20 a share.What is the dividend growth rate at this price?

Accepted Answer

The answer of Russell Foods pays a fixed annual dividend...

Question 7

JLT is a mature manufacturing firm.The company just paid an annual dividend of $3.62, but management expects to reduce future payouts by 3.5 percent per year, indefinitely.What is this stock worth today at a required return of 12.5 percent?

Accepted Answer

The answer of JLT is a mature manufacturing firm.The company...

Question 8

A particular stock sells for $43.20 share and provides a total return of 11.6 percent.The total return is evenly divided between the capital gains yield and the dividend yield.Assuming a constant dividend growth rate, what is the current dividend per share?

Accepted Answer

The answer of A particular stock sells for $43.20 share...

Question 9

The Chip Dip Co.has 685,500 shares of stock outstanding, grants one vote per share, and uses straight voting.How many shares must you control to guarantee that you will be elected to the firm's board of directors if there are five open seats?

Accepted Answer

The answer of The Chip Dip Co.has 685,500 shares of...

Question 10

Graphic Designs has 68,000 shares of cumulative preferred stock outstanding.Preferred shareholders are supposed to be paid $1.60 per quarter per share in dividends.However, the firm has encountered financial problems and has not paid any dividends for the past three quarters.How much will the firm have to pay per share of preferred next quarter if the firm also wishes to pay a common stock dividend?

Accepted Answer

The answer of Graphic Designs has 68,000 shares of cumulative...

Question 11

The next dividend payment by S&S will be $1.38 per share.The dividends are anticipated to maintain a 2.5 percent growth rate, forever.If the stock currently sells for $26.90 per share, what is the required return?

Accepted Answer

The answer of The next dividend payment by S&S will...

Question 12

Hi-Lo has 160,000 shares outstanding priced at $33 a share.There will be three open positions on its board in the next election.Currently, you are not a shareholder but would like to become one and also gain a seat on the board.How much will it cost you to buy a seat if the company uses straight voting? What if the firm uses cumulative voting?

Accepted Answer

The answer of Hi-Lo has 160,000 shares outstanding priced at...

Question 13

The VIC Co.has preferred stock outstanding that pays a $4.50 dividend annually and sells for $48.20 per share.What is the rate of return?

Accepted Answer

The rate of return is calculated by dividing the annual dividend by the share price. In this case, the annual dividend is $4.50 and the share price is $48.20. Therefore, the rate of return is $4.50/$48.20 = 9.34%.

Question 14

AZ stock closed today at $18.24, down .23.The dividend yield is 2.4 percent.What was yesterday's closing price if the firm pays a constant $.40 per share quarterly dividend?

Accepted Answer

Yesterday's closing price was $18.47 because today's closing price of $18.24 is down by $0.23. Adding $0.23 to $18.24 gives $18.47.

Question 15

A preferred stock sells for $54.20 a share and has a market return of 9.68 percent.What is the dividend amount?

Accepted Answer

The answer of A preferred stock sells for $54.20 a...

Question 16

Spiral Staircase is offering preferred stock which is referred to as 10-10 stock.This stock will pay an annual dividend of $10 a share starting 10 years from now.What is this stock worth to you today if you require a rate of return of 9.5 percent?

Accepted Answer

The value of the stock today is the present value of the $10 dividend received annually starting 10 years from now. The present value of a perpetuity starting in the future is calculated by dividing the annual dividend by the required rate of return and then discounting it back to the present value. The formula is: PV = D / r * (1 / (1 + r)^n), where D is the dividend, r is the rate of return, and n is the number of years until the dividend starts. Plugging in the numbers: PV = $10 / 0.095 * (1 / (1 + 0.095)^10) = $46.51.

Question 17

Gamma Corp.is expected to pay the following dividends over the next four years: $7.50, $8.25, $15, and $1.80.Afterward, the company pledges to maintain a constant 4 percent growth rate in dividends, forever.If the required return is 14 percent, what is the current share price?

Accepted Answer

The correct answer is A because the current share price is $35.20. This is calculated by using the Gordon Growth Model, which is:P = D / (r - g)where:P = current share priceD = expected dividend in the next yearr = required returng = growth rateIn this case, the expected dividend in the next year is $7.50, the required return is 14%, and the growth rate is 4%. Plugging these values into the formula, we get:P = $7.50 / (0.14 - 0.04) = $35.20

Question 18

Industrial Products has both common and noncumulative preferred stock outstanding.The dividends on these stocks are $1.10 per quarter per share of common and $2.25 per quarter per share of preferred.The company has not paid any dividends for the past two quarters but is expected to pay dividends on both the common and the preferred stock next quarter.What is the minimum amount the firm must pay per share to its preferred stockholders next quarter if it plans to pay a common dividend?

Accepted Answer

Since the preferred stock is noncumulative, the company is not required to pay the missed dividends from the past two quarters. Therefore, the minimum amount the firm must pay per share to its preferred stockholders next quarter is the regular quarterly dividend of $2.25.

Question 19

Today's stock market report shows that SW Companies has a PE ratio of 9.8, a dividend yield of 2.2 percent, a closing price $29.86, and a net change of .11.What is the annual dividend amount?

Accepted Answer

The answer of Today's stock market report shows that SW...

Question 20

According to today's stock report, BL Lumber shares were up .14, the stock dividend yield is 2.6 percent, and the PE ratio is 9.8.What is the amount of the next annual dividend if yesterday's closing price was $35.14?

Accepted Answer

The answer of According to today's stock report, BL Lumber...

Quiz 7: Equity Markets and Stock Valuation