Question 1

The common stock of JL Recyclers has a required return of 12 percent and a current value of $18.72.The company pays its dividend annually and increases the amount by 4 percent each year.You own 300 shares of this stock.What was the total amount of the last dividend you received?

Accepted Answer

11ea6d0e_c3fb_f2ff_b3c7_bf919f617301_TB1223_00 Last total dividend = $1.44 × 300 = $432

Question 2

The Rug Barn has paid annual dividends of $1.30,$1.36,$1.40,$1.42,and $1.45 over the last 5 years,respectively.What is the geometric average dividend growth rate?

Accepted Answer

11ea6d0e_c3fb_f300_b3c7_c3488d8b6d36_TB1223_00

Question 3

Blue Water Tours just paid an annual dividend of $0.80 a share.The firm has a policy of increasing the dividend by 3.5 percent annually.What is the current value of this stock at a discount rate of 11.5 percent?

Accepted Answer

11ea6d0e_c3fb_2fa4_b3c7_7f01e9a6029a_TB1223_00

Question 4

Main Street Antiques is planning on paying an annual dividend of $2.20 per share next year.The company is slowly downsizing and is decreasing its dividend by 3 percent annually.What is the current value of this stock at a discount rate of 8 percent?

Accepted Answer

11ea6d0e_c3fb_7dca_b3c7_27969074f3df_TB1223_00

Question 5

Wilson's Furniture is experiencing good growth so has decided to commence paying dividends starting next year.The first dividend will be $0.50 a share with annual increases of 4 percent in the dividend amount.The discount rate is 10 percent.What will the value of this stock be four years from now?

Accepted Answer

11ea6d0e_c3fb_7dc8_b3c7_ef44b9180968_TB1223_00

Question 6

Lakeside Sheet Metal is downsizing and plans on completely closing 3 years from now.The firm's liquidation plan calls for annual dividends of $3,$6,and $36 over the next 3 years,respectively.What is the current value of this stock given a discount rate of 14 percent?

Accepted Answer

11ea6d0e_c3fb_0892_b3c7_bf8967995576_TB1223_00

Question 7

The Back Room just paid an annual dividend of $1.50 a share.The firm expects to pay dividends forever and to increase the dividend by 4.5 percent annually.What is the expected value of this stock six years from now if the discount rate is 12 percent?

Accepted Answer

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Question 8

You would like to know the value of a firm's equity today in relation to the cost of that equity.Which one of the following ratios will provide you with this information?

Accepted Answer

The price-book ratio compares a firm's market value to its book value, directly relating the value of a firm's equity today to its cost. This ratio is useful for assessing whether a stock is over or undervalued by comparing the market price of the company's shares to the equity value recorded in the financial statements.

Question 9

Alpha Wood Interiors announced today that it is going out of business.As of today,no more regular dividends will be paid.The firm will,however,pay two liquidating dividends.The first will be paid one year from now in the amount of $15 a share.The second and final payment will be paid two years from now at an estimated $40 a share.What is the value of this stock today at a discount rate of 16 percent?

Accepted Answer

11ea6d0e_c3fb_2fa3_b3c7_09271688147f_TB1223_00

Question 10

A firm has paid annual dividends of $1.34,$1.43,$1.55,$1.62,$1.64,and $1.75 per share over the past 6 years,respectively.What is the geometric average growth rate for these dividends?

Accepted Answer

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Question 11

A stock sells for $12.36 a share and has a required return of 9 percent.Dividends are paid annually and increase at a constant 3 percent per year.What is the amount of the last dividend paid?

Accepted Answer

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Question 12

Precision Engineering recently announced that its next annual dividend will be $1.20 per share with later dividends increasing by 2.5 percent annually.What is the current value of this stock to you if you require a 12 percent rate of return?

Accepted Answer

11ea6d0e_c3fb_56b5_b3c7_3d2e398a522d_TB1223_00

Question 13

You are considering buying shares of stock in the Steel Mill.The forecast for the firm is steady growth over the next decade.The firm just paid its annual dividend of $1.42 per share and has plans to increase that amount by 4 percent annually indefinitely.You require a 12.5 percent return on this type of security.What is your estimate of the value of this stock ten years from now?

Accepted Answer

11ea6d0e_c3fb_a4db_b3c7_a39cdb96b1e8_TB1223_00

Question 14

Wholesale Foods common stock is valued at $11.05 per share.The firm pays annual dividends which increase at a constant rate.The last dividend paid was $1.20.The required return is 12 percent.What is the dividend growth rate?

Accepted Answer

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Question 15

BP Industries stock is valued at $11.50 a share.The firm pays annual dividends at an increasing rate of 3.0 percent annually.Next year's dividend will be $1.15 per share.What is the required return on this stock?

Accepted Answer

11ea6d0e_c3fb_a4dc_b3c7_5719cc7cc603_TB1223_00

Question 16

Factory Stores pays annual dividends and increases those dividends by 3 percent each year.The stock is currently valued at $11.80 a share and has a required return of 14 percent.You own 500 shares of this stock.What is the total amount of dividend income you should expect to receive next year?

Accepted Answer

D(1) = P₀(r − g) = $11.80(0.14 − 0.30) = $1.30 Dividend income = $1.30 × 500 = $649

Question 17

Long Life Floors just paid an annual dividend of $0.82 a share and plans on increasing future dividends by 2 percent annually.The discount rate is 15 percent.What will the value of this stock be 5 years from today?

Accepted Answer

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Question 18

The Barclay House increases its dividend each year.The next annual dividend is expected to be $1.75 a share.Future dividends will increase by 4 percent annually.What is the current value of this stock if the discount rate is 10 percent?

Accepted Answer

11ea6d0e_c3fb_56b6_b3c7_e1ec9081c3fc_TB1223_00

Question 19

America Boats plans to pay a $2.10 a share dividend at the end of each of the next 2 years.At the end of year 3,it will pay a final liquidating dividend of $13 a share.After that,the company plans to close its doors permanently.What is the current value of this stock at a discount rate of 12 percent?

Accepted Answer

11ea6d0e_c3fa_e180_b3c7_fb5c4c4b23ac_TB1223_00

Question 20

Upwind Tours just announced that it will pay an annual dividend of $3.60 a share one year from now.Two years from now,the company expects to pay a $28 a share liquidating dividend.After that,the company will cease operations.What is the current value per share at a discount rate of 12.5 percent?

Accepted Answer

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Quiz 6: Common Stock Valuation