12., An asset characterized by cash flows that increase at a constant rate forever is called a: A. , Growing perpetuity. B. , B. , Growing annuity. C. , C. , Common annuity.
. , . , !er"etuity due.
#. , #. , !referred stoc$.
1%., &he stoc$ valuation model that determines the current stoc$ "rice as the ne't dividend divided by the (discount rate less the dividend growth rate) is called the: B. , ividend growth model. A. , A. , *ero growth model. C. , C. , Ca"ital Asset !ricing +odel. . . , , #arnings ca"italization model. #. , #. , !er"etual growth model. 1., A stoc$-s ne't e'"ected dividend divided by the current stoc$ "rice is the: A. , A. , Current yield. B. , B. , &otal yield. . , , Ca"ital gains yield. C. , ividend yield. .
#. , #. , #arnings yield.
1., &he rate at which the stoc$ "rice is e'"ected to a""reciate (or de"reciate) is the: A. , A. , Current yield. B. , B. , &otal yield. C. , C. , ividend yield. D. , Ca"ital gains yield.
#. , #. , #arnings yield.
1/., #0uity without "riority for dividends or in the event of ban$ru"tcy is called: A. , A. , ual class stoc$. B. B. , , Cumulative stoc$. C. C. , , eferred stoc$. . . , , !referred stoc$.
E. , Common stoc$.
1., &he term is usually a""lied to stoc$ that has no s"ecial "reference either in "aying dividends or in ban$ru"tcy. C. , common stoc$ . A. , A. , "referred stoc$ B. B. , , debenture . , , cumulative voting #. , #. , "ro'y 13., 4!reem"tive rights4 refers to: A. , A. , &he right of shareholders to share "ro"ortionately in dividends "aid. C. , C. , &he right of shareholders to share "ro"ortionately in li0uidated assets. #. , #. , &he right to redeem shares.
B. , The right of shareholders to share proportionately in any new stock issues sold.
. , . , &he right of shareholders to vote at annual shareholder meetings.
15., !ayments made by a cor"oration to its shareholders, in the form of either cash, stoc$, or "ayments in $ind, are called: C. , Dividends. A. , A. , 6etained earnings. B. , B. , 7et income. . , . , 6edistributions. #. #. , , 8nfused e0uity. 29., #0uity with differential voting rights andor dividend "ayment claims is called: . , . , !referred stoc$.
B. , , Cumulative stoc$. C. C. , , eferred stoc$. A. , Dual class stock. B.
#. , #. , Common stoc$.
21., #0uity with "riority for dividends and in the event of ban$ru"tcy is called: A. , A. , ual class stoc$. B. B. , , Cumulative stoc$. C. C. , , eferred stoc$. D. , Preferred stock. #. #. , , Common stoc$. 22., &he short al"habetic abbreviation for an e'change;listed stoc$ by which the issue is identified in the mar$et is called the stoc$-s . A. , A. , <"en name. B. , B. , &rading range. C. , C. , #'change name. D. , Ticker sy!ol. #. #. , , !riceearnings descri"tion 2%., &he voting "rocedure where shareholders may cast all of their votes for one member of the board is: B. , Cuulative voting. A. , A. , emocratic voting. C. , , =traight voting. . C. . , , eferred voting. #. #. , , !ro'y voting. 2., &he voting "rocedure where shareholders may cast all of their votes for each member of the board is: C. , "traight voting. . A. , A. , emocratic voting. B. , B. , Cumulative voting. . , , eferred voting. #. #. , , !ro'y voting. 2., &he voting "rocedure where shareholders grant authority to another individual to vote their shares is called: A. , A. , emocratic voting. B. , B. , Cumulative voting. C. , , =traight voting. C. E. , Pro#y voting. . , . , eferred voting. 2/., A stoc$ whose "rice can be com"uted by dividing the annual dividend amount by the re0uired rate of return is called a growth stoc$. C. , $ero. . A. , A. , Constant. B. , , =u"ernormal. B. =u"ernormal. . , , Ca"ital gains. #. , #. , ividend. 2., !referred stoc$ is a ty"e of growth stoc$.
A. , , Constant. A.
B. , *ero.
C. , C. , =u"ernormal.
23., Given a "rice at year , the dividend in the dividend growth model would be defined as: A. , A. , &he last annual dividend "aid. B. , B. , &he annual dividend in year 1. C. , C. , &he 0uarterly dividend in year .
. , . , Ca"ital gains.
#. , #. , ividend.
. , . , &he 0uarterly dividend in year /.
E. , The annual dividend in year %.
25., &he ca"ital gains yield as used in the dividend growth model is defined as:
A. , A. , 9!9. B. B. , , 1!9. C. C. , , gr.
D. , g.
#. , #. , g!9.
%9., &he "rocedure which has the effect of "ermitting minority "artici"ation in voting is called voting. A. , A. , !ro'y. C. , C. , =traight. . , , !referred. . #. , #. , >reeze out. B. , Cumulative. %1., A cumulative dividend is defined as a dividend that is: B. , B. , !ayable only if current o"erations generate sufficient cash in a year to "ay the dividend. C. , C. , !aid only to senior holders of common stoc$. . , . , &reated as an interest e'"ense. #. , #. , !aid as an e'tra "ayment if the share of stoc$ is called.
A. , Carried forward as an arrearage if not "aid.
%2., ?hich of the following is true of non;voting common stoc$@ A. , A. , 8t is not legal in Canada to issue common stoc$ without voting rights. C. , C. , 7on;voting common stoc$holders must be "aid a dividend each year. #. , #. , 7on;voting shares commonly sell at a "remium over voting shares.
B. , B. , A 4coattail4 "rovision re0uires that 2% of all common stoc$ carry voting rights. D. , 7on;voting shares must receive dividends no lower than dividends on voting shares.
%%., &he re0uired return is defined as: A. , &he ca"ital gains yield "lus the dividend yield.
B. , B. , 7e't year-s dividend divided by the current "rice. C. , &he increase in the value of a share of stoc$ over a "eriod of time. C. , . , . , &he rate at which a stoc$ increases in value. #. , #. , &he "ayment by a cor"oration to shareholders in the form of cash or stoc$. %., A grant of authority by a shareholder allowing for another individual to vote hisher shares is a . A. , A. , !referred stoc$. B. , !ro'y. C. C. , , ="ecialist. . , . , Cumulative voting right. #. , #. , ual class stoc$.
%., ?hich of the following is a legitimate reason the valuation of common stoc$ is generally harder than the valuation of bonds@ 8. >uture cash flows on stoc$s are not $nown in advance. 88. Common stoc$s don-t have a maturity date. 888. Common stoc$ valuation is sensitive to estimates of the dividend growth rate. A. , 8 only B. , 8 and 88 only C. , 8 and 888 only . , 88 and 888 only E. , 8, 88, and 888 %/., ?hich of the following is true about the differences between debt and common stoc$@ A. , ebt is ownershi" in a firm but e0uity is not. B. , Creditors have voting "ower while stoc$holders do not. C. , !eriodic "ayments made to either class of security are ta' deductible for the issuer. D. , 8nterest "ayments are "romised while dividend "ayments are not. #. , Bondholders can also own e0uity, but not vice versa. %., ou are considering investing in a firm and wish to "lace a value on the common stoc$. &he dividend on the firm-s stoc$ has not changed in the last five years. Absent any information suggesting future changes in the dividend rate, the most a""ro"riate stoc$ valuation model would be the model. B. , =u"ernormal growth. C. , 7on;constant growth. . , Growing "er"etuity. #. , Bond "ricing. A. , *ero growth. %3.,
A. , 8 only
B. , 8 and 88 only
C. , 8 and 888 only
. , 88 and 888 only
E. , &, &&, and &&&
9., ?hich of the following is (are) true@ 8. &he dividend growth model only holds if, at some "oint in time, the dividend growth rate e'ceeds the stoc$-s re0uired return. 88. A decrease in the dividend growth rate will increase a stoc$-s mar$et value, all else the same. &&&. An increase in the re)uired return on a stock will decrease its arket value, all else the sae. B. , 888 only A. , 8 only C. , 88 and 888 only . , 8 and 888 only #. , 8, 88, and 888
1., ou are attem"ting to value a stoc$ in an industry where firms are generating e'ce"tional dividend growth, but this growth is e'"ected to slow to an e0uilibrium growth rate in about five years. ly;By;7ite Airlines. &he e'"ected value of the firm-s stoc$ at the end of four years (!
) is:
&. D*+r - g &&. P( / ' 0 g 1
888. 9 F (1 E g)(r ; g) A. , 8 only B. , 88 only
C. , & and && only
. , 8 and 888 only
#. , 8, 88, and 888
/., ou are attem"ting to value the shares of a new, high;technology firm in a develo"ing industry. ou would +<=& li$ely: A. , se the growth dividend model. C. , se the zero growth dividend model. B. , se the non;constant growth dividend model. . , >ind the value by valuing the stoc$ as a "er"etuity. #. , 7ot be able to value this com"any. ., ?hich of the following common shareholder rights $ic$s in when a merger is "ro"osed@ A. , &he right to share "ro"ortionately in dividends "aid. B. , &he right to share "ro"ortionately in remaining assets from a li0uidation. C. , &he right to vote for directors. . , !reference over "referred shareholders in the "ayment of dividends. E. , &he right to vote on shareholder matters of great im"ortance. 3., ?hich of the following is 7<& usually a right of a common stoc$holder@ A. , 6ight of first refusal to buy new "referred stoc$, when issued. B. , !reem"tive right. C. , 6ight to receive "ro"ortionate dividends, when "aid. . , 6ight to claim "ro"ortionate remaining assets from a li0uidation. #. , 6ight to vote by "ro'y. 5., ou Hust voted against a merger "ro"osal made by another cor"oration. ou must own: C. , Coon stock . . , Cumulative dividend stoc$. #. , Class B stoc$. A. , !referred stoc$. B. , ebentures. 9., As a common shareholder in a firm, which of the following allows you to share "ro"ortionately in any new stoc$ sold@ B. , Preeptive right. A. , !ro'y voting. C. , Cumulative voting. . , =traight voting. #. , ual class stoc$. 1., ?hich of the following isare true about common stoc$ dividends@ 8. !ayment of dividends is a ta' deductible business e'"ense for a cor"oration. 88. ividends that have been declared but are not yet "aid are liabilities of the cor"oration. 888. ividends received by both individuals and cor"orations are fully ta'able. A. , 88 only B. , 888 only C. , 8 and 888 only . , 88 and 888 only #. , 8, 88, and 888
2., ?hich of the following statements about dividends is false@ A. , !referred stoc$ dividends often re"resent a ta';advantaged investment for some cor"orations. B. , ividends "aid to shareholders re"resent a return on the ca"ital directly or indirectly contributed to the cor"oration by shareholders. C. , &he "ayment of dividends is at the discretion of the board of directors. . , &he "ayment of dividends by the cor"oration is not a ta';deductible business e'"ense. E. , A corporation can !e sued for not paying undeclared dividends.
%., &he "rimary reason for creating dual or multi"le classes of stoc$ has to do with: A. , #'change listing re0uirements. B. , =atisfying &=I bylaws. C. , >reezing out minority shareholders.
. , !aying for ac0uisitions. E. , Control of the fir.
.,
. , A "reem"tive right
#. , Cumulative voting "ower
., ?hich of the following is 7#J#6 a right of an owner of a share of "referred stoc$@ 8. &he right to share "ro"ortionately in "referred dividends "aid. 88. &he right to share "ro"ortionately in remaining assets from a li0uidation. 888. &he right to vote for directors. B. , 888 only A. , 8 only C. , 8 and 88 only . , 88 and 888 only #. , 8 and 888 only /., ?hich of the following does 7<& correctly com"lete this sentence: !referred stoc$ is much li$e debt in that . A. , Both fre0uently carry credit ratings B. , Both can be re"aid using a sin$ing fund C. , Both receive a stated "ayment from the cor"oration during the year D. , Both "ayments are subHect to the same ta' treatment for the issuing firm #. , &he holders of both get a stated "ayment in the event of a li0uidation ., ?hich of the following is a true statement regarding "ublicly traded stoc$s and bonds@ A. , A share of "referred stoc$ is generally easier to value than a share of common stoc$. B. , &he "rice of a stoc$ is greater than the "resent value of all future dividends. C. , =toc$ dividends are a legally;binding liability of the cor"oration. . , A share of "referred stoc$ re"resents an ownershi" interest in a cor"oration. #. , !referred stoc$ is more li$e common stoc$ than it is li$e a bond. 3., ?hich of the following ty"ically a""lies to "referred stoc$ but 7<& to common stoc$@ A. , !ar value. B. , ividend yield. C. , Cuulative dividends. . , 8t is legally considered e0uity.
#. , &he dividends are a ta';deductible e'"ense.
5., ?hich of the following terms is ty"ically associated with B<&K "referred stoc$ and common stoc$@ C. , Dividend yield. . , Arrearage. A. , !ro'y. B. , Joting rights. #. , Cumulative voting. /9., ?hich of the following is 7<& a right of an owner of a share of common stoc$@ A. , &he right to share "ro"ortionately in dividends "aid. B. , &he right to share "ro"ortionately in remaining assets from a li0uidation. D. , Preference over preferred shareholders in the payent of dividends. C. , &he right to vote for directors. #. , &he right to vote on stoc$holder matters of great im"ortance. /1., ?hich of the following would be considered a violation of the rights of one or more classes of a firm-s sta$eholders@ A. , Coon dividends are paid even though preferred dividends are in arrears. B. , !referred stoc$holders are "aid before common shareholders in a li0uidation. C. , Common stoc$holders are able to "lace members on the board of directors to re"resent their interests in o""osition to the board candidates bac$ed by "referred shareholders. . , Common shareholders are able to vote by "ro'y even when they are unable to attend a shareholders- meeting in "erson. #. , ebt is re"aid before "referred shareholders are "aid anything in a li0uidation. /2., ?hich of the following items does 7<& usually a""ear in a National Post common stoc$ 0uote@ A. , Capital gains rate. B. , ividend yield. C. , Closing "rice. . , Kigh and low "rice for the trading day. #. , 7umber of shares traded (volume). /%., 8f two stoc$s have the same earnings "er share and re0uired rate of return, differences in the of the two com"anies can account for different stoc$ "rices. B. , Growth opportunities. A. , Joting rights. C. , 7umber of shares outstanding. . , 7umber of directors. #. , Jalue of "referred stoc$. /., can freeze out minority shareholders. A. , "traight voting. B. , Cumulative dividends. C. , !ro'y voting.
. , Cumulative voting.
#. , +ulti"le classes of stoc$.
/., ou wish to be on the board of directors of a com"any. 8f you wish to buy as low a "ercentage of the total outstanding shares as is necessary to guarantee yourself a seat on the board, you should loo$ for a firm that has . A. , Cumulative "referred stoc$. B. , Cumulative voting Class B stoc$. C. , Convertible debentures. . , =traight voting common stoc$. E. , Cuulative voting coon stock.
//., 8t is more difficult to value a stoc$ than it is to value a bond because: A. , &he future cash flows of a stoc$ are $nown. B. , &he life of an e0uity security is limited. C. , &he re0uired mar$et rate of return on a stoc$ is $nown in advance. D. , E)uity securities have no aturity date. #. , &he maturity value of a stoc$ is $nown. /., &he ABC Co. has "aid annual dividends of 9.%9, 9./, 1.29, and 1. over the "ast four years. ividends in the future are e'"ected to grow at a constant rate of %.. ?hich one of the following formulas should be used to com"ute the value of the stoc$ today@ D. , P( 3 D'+r - g A. , !9 D 1(1 E r) 1 E 2(1 E r) 2 ... E n(1 E r) n E !n(1 E r) n B. , !9 D r C. , !9 D 1(1 E r) n E g #. , !9 D 1(r ; g) n /3., A su"ernormal growth stoc$ generally: A. , 8s associated with a com"any that is e'"eriencing ra"id contraction. B. , &ends to increase its dividends "er share by %9 or more for an e'tended number of years. C. , Kas high growth dividends only for a limited number of years. . , Kas dividends that grow at a high rate for the life of the stoc$. #. , 8s valued using the "referred stoc$ valuation techni0ue. /5., 1 in the dividend growth model is associated with which of the following words when solving for ! 9@ B. , Last, Hust "aid, recent. C. , Must "aid, e'"ected, "ast. . , !aid today, recent, current. A. , 4e#t, e#pected, future. 9., 8f the re0uired rate of return used in the dividend growth model is increased, then: B. , &he current value of the stoc$ will decrease. A. , &he dividend amount must also increase. . , &he su"ernormal model must be used to value the stoc$. #. , &he growth rate must also increase.
C. , !9 will increase.
#. , #'"ected, "aid today, recent.
1., ?hich of the following rights are granted to shareholders of common stoc$@ &. Election of corporate directors
88. =election of all senior management e'ecutives &&&. The option of voting !y pro#y &5. The right to share in any reaining assets in a li)uidation
A. , 8 and 888 only
B. , 88 and 8J only
C. , 8, 88, and 888 only D. , &, &&&, and &5 only
#. , 8, 88, 888, and 8J
2., ?hich of the following statements concerning dividends is (are) correct@ &. Dividends !ecoe a lia!ility of the corporation at the tie they are declared.
88. &he stoc$holders determine the amount of dividend to be "aid. 888. ividends are a ta' deductible e'"ense. 8J. Common stoc$ dividends can be either cumulative or non;cumulative. A. , & only B. , 88 only C. , 8 and 8J only . , 88 and 8J only
#. , 8 and 888 only
%., 8f the management of a cor"oration wants to raise e0uity ca"ital while maintaining control over the cor"oration and limiting their cash outflows, they should issue shares of: D. , 4on-voting coon stock . #. , *ero cou"on bonds. A. , 7on;voting "referred stoc$. B. , Joting "referred stoc$. C. , Joting common stoc$. ., =hareholders of convertible "referred stoc$ generally have the: A. , 6ight to convert their shares into bonds with an e0uivalent yield;to;maturity. B. ,
., 8t is easier for an outsider to gain control over a cor"oration when: A. , Joting by "ro'y is not "ermitted. B. , +anagement controls most of the common shares outstanding. . , !referred shares are not convertible. #. , =hareholders receive a consistently high rate of return.
C. , Cuulative voting is used.
/., ?hich one of the following statements is correct concerning the differences between "referred and common stoc$@ A. , Common shareholders have first right of "riority after creditors in li0uidation. B. , !referred shares carry voting rights while common shares do not. C. , Coon shareholders generally have ore control over a corporation than preferred shareholders.
. , Common dividends in arrearage must be "aid "rior to any additional "referred stoc$ dividends. #. , Common stoc$ is a form of e0uity while "referred stoc$ is a form of debt from a legal stand"oint. ., &here are three seats o"en on the board of directors of ABC, 8nc. Ann owns voting shares of ABC common stoc$. 8f ABC uses cumulative voting, the ma'imum number of shares that Ann can vote for any one "osition is e0ual to: A. , &he number of o"en seats. B. ,
8J. !referred stoc$ is never callable. A. , 888 only B. , 8J only
C. , 888 and 8J only
. , 88, 888, and 8J only
#. , 8, 88, and 888 only
3%., ?hat would you "ay for a share of ABC Cor"oration stoc$ today if the ne't dividend will be 2 "er share, your re0uired return on e0uity investments is 12, and the stoc$ is e'"ected to be worth 119 one year from now@ A. , 5 B. , 199 C. , 119 . , 11 #. , 129 3., &he dividend on =im"le +otors common stoc$ will be 2 in one year, %.9 in two years, and .99 in three years. ou can sell the stoc$ for in three years. 8f you re0uire a 19 return on your investment, how much would you be willing to "ay for a share of this stoc$ today@ A. , 5./5 B. , /./ . , /.// #. , 1.%9 C. , /.32 3., A stoc$ that "ays a constant dividend of 2.9 forever currently sells for 21. ?hat is the re0uired rate of return@ 7. , Type8 Pro!les A. , 11.9 B. , 11. C. , 12.9 . , 12. #. , 1%.9 3/., =u""ose 7oGro, 8nc. has Hust issued a dividend of 2.59 "er share. =ubse0uent dividends will remain at 2.59 indefinitely. 6eturns on the stoc$ of firms li$e 7oGro are currently running 1. ?hat is the value of one share of stoc$@ C. , '9.:: A. , 2.59 B. , 1%./ . , %1.2 #. , %5.9
3., ABC Com"any-s "referred stoc$ is selling for 2 a share. 8f the re0uired return is 12, what will the dividend be two years from now@ C. , ;:.(( A. , 2.%5 B. , 2.9 . , %.%9 #. , %./ 33., &he "referred stoc$ of the !earson 8nstitute "ays a constant annual dividend of % and sells for 21. ou believe the stoc$ will sell for 12 in one year. ou must, therefore, believe that the re0uired return on the stoc$ will be in one year. A. , 3N higher B. , 3N lower C. , 5N higher . , 19N lower E. , '(< higher 35., ?hat would you "ay today for a stoc$ that is e'"ected to ma$e a 1.9 dividend in one year if the e'"ected dividend growth rate is % and you re0uire a 1/ return on your investment@ B. , 12.%% C. , 12.% . , 1%.1 #. , 1.%9 A. , ;''.*1 59., &he stoc$ of +& Golf ?orld currently sells for 1%%. "er share. &he firm has a constant dividend growth rate of and Hust "aid a dividend of /.21. 8f the re0uired rate of return is 12, what will the stoc$ sell for one year from now@ C. , 1%.11 A. , 12.9/ B. , 1%%. . , 15.39 #. , 12.3 51., =u""ose !ale Kose, 8nc. has Hust "aid a dividend of 1.9 "er share. =ales and "rofits for !ale Kose are e'"ected to grow at a rate of "er year. 8ts dividend is e'"ected to grow by the same amount. 8f the re0uired return is 19, what is the value of a share of !ale Kose@ E. , 25.9 A. , 1.99 B. , 1.2 C. , 2.39 . , 23.99 52., Boomer !roducts, 8nc. manufactures 4no;inhale4 cigarettes. As its target customers age and "ass on, sales of the "roduct are e'"ected to decline. &hus, demogra"hics suggest that earnings and dividends will decline at a rate of annually forever. &he firm Hust "aid a dividend of 2.9N given a re0uired return of 12, the stoc$ should today should sell for: C. , ;'*.(( A. , 19.2 B. , 12.9 . , 1/.2 #. , %2.9 5%., Boomer !roducts, 8nc. manufactures 4no;inhale4 cigarettes. As its target customers age and "ass on, sales of the "roduct are e'"ected to decline. &hus, demogra"hics suggest that earnings and dividends will decline at a rate of annually forever. &he firm Hust "aid a dividend of 2.9N given a re0uired return is 12, the "rice of the stoc$ in two years will be: C. , ':.=> A. , 5. B. , 11.2 . , 1.53 #. , 25.5 5., Llano-s stoc$ is currently selling for 1. &he e'"ected dividend one year from now is 1.9 and the re0uired return is 19. ?hat is this firm-s dividend growth rate assuming the constant dividend growth model is a""ro"riate@ A. , ?@ B. , 3 C. , 5 . , 19 #. , 11 5., &he current "rice of I* stoc$ is 1. ividends are e'"ected to grow at indefinitely and the most recent dividend was 1. ?hat is the re0uired rate of return on I* stoc$@ A. , 5.9 B. , 9.'@ C. , 5.% . , 19./ #. , 11.2 5/., ABC Cor"oration-s common stoc$ dividend yield is 2.1, it Hust "aid a dividend of 1, and is e'"ected to "ay a dividend of 1.9 one year from now. ividends are e'"ected to grow at a constant rate indefinitely. ?hat is the re0uired rate of return on ABC stoc$@ A. , 5.9 B. , 9.'@ C. , 5.% . , 19./ #. , 11.2 5., =u""ose that you have Hust "urchased a share of stoc$ for 22.1. &he most recent dividend was 1.9 and dividends are e'"ected to grow at a rate of indefinitely. ?hat must your re0uired return be on the stoc$@ D. , '>.((@ A. , .99 B. , .99 C. , 19.2 #. , 1%./ 53., Oillnum Cor". announces that the dividend for the ne't year will be 2.9 "er share rather than the originally e'"ected 1.9 "er share. >rom then on, it is e'"ected that dividends will resume their historical constant growth rate of "er year. ?hat would you e'"ect to ha""en to the "rice of the stoc$@ 8gnore any ta' effects. B. , The price will likely rise !y less than '((@. A. , &he "rice will li$ely double. C. , &he "rice will li$ely rise by e'actly 9. . , &he "rice will remain unchanged. #. , &he "rice will li$ely rise by the "resent value of 1. 55., +cGonigal-s +eats, 8nc. currently "ays no dividends. &he firm "lans to begin "aying dividends in three years. &he first dividend will be 1 and dividends are e'"ected to grow at thereafter. Given a re0uired return of 1, what would you "ay for the stoc$ today@ B. , ;?.*% A. , .13 C. , 3.25 . , 19.99 #. , 19.9 199., +c8ntyre-s +oats, 8nc. currently "ays no dividends, but the firm will begin "aying dividends in three years. &he first dividend will be 2.9 and dividends are e'"ected to grow at 2 thereafter. Given a current mar$et "rice of ./2, what is the re0uired return on the stoc$@ C. , / A. , B. , . , #. , 3 191., +c8ver-s +eals, 8nc. currently "ays a 1 annual dividend. 8nvestors believe that dividends will grow at 1 ne't year, 19 annually for the two years after that, and annually thereafter. Assume the re0uired return is 19. ?hat is the current mar$et "rice of the stoc$@ C. , 2.95 A. , 21. B. , 22.55 . , 2/.1% #. , 2./ 192., Biogenetics, 8nc. "lans to retain and reinvest all of its earnings for the ne't %9 years. Beginning in year %1, the firm will begin to "ay a 12 "er share dividend. &he dividend will not subse0uently change. Given a re0uired return of 1, what should the stoc$ sell for today@ A. , 1.21 B. , 2.1 C. , 3.1 . , 2.99#. , 39.99 19%., Biogenetics, 8nc. "lans to retain and reinvest all of its earnings for the ne't %9 years. Beginning in year %1, the firm will begin to "ay a 12 "er share dividend. &he dividend will increase at a / rate annually thereafter. Given a re0uired return of 1, what the stoc$ should sell for today@ A. , 1.21 B. , 1./ C. , 2.91 . , .%5 #. , 1%. 19., =u""ose the !ale Kose Cor". is e'"ected to "ay a dividend ne't year of 1. "er share. Both sales and "rofits for !ale Kose are e'"ected to grow at a rate of 1 for the following two years and then at 2 "er year thereafter indefinitely. ividend growth is e'"ected to match sales growth. 8f the re0uired return is 1, what is the value of a share of !ale Kose@ C. , 1.52 A. , 1/.5 B. , 1/.53 . , 13.5 #. , 15./ 19., #nergistics, 8nc. "lans to retain and reinvest all of its earnings for the ne't three yearsN at the end of year % the firm will "ay a s"ecial dividend of "er share. Beginning in year , the firm will begin to "ay a dividend of 1 "er share, which is e'"ected to grow at a % rate annually forever. Given a re0uired return of 12, the stoc$ should sell for today. A. , 11. B. , 12. C. , 1%.1 . , 1.2 #. , 1.91
19/., +oore +oney 8nc. Hust "aid a dividend of 1. &he re0uired return on the stoc$ is 1. 8f it has the following e'"ected dividend growth rates what should the stoc$ sell
for@ A. , 22.
B. , 2/.1
C. , 2.5
D. , ;>=.=9
#. , 25./3
19., =u""ose that sales and "rofits of
The National Post @
111., A firm-s stoc$ has a re0uired return of 19. &he stoc$-s dividend yield is /. ?hat is the dividend the firm is e'"ected to "ay in one year if the current stoc$ "rice is 9@ A. , 2.99 B. , 2.9 C. , 2.39 . , %.29 #. , %./9 112., A firm-s stoc$ has a re0uired return of 19. &he stoc$-s dividend yield is /. ?hat dividend did the firm Hust "ay if the current stoc$ "rice is 9@ A. , 2.13 B. , 2.%1 C. , 2.9 . , 2.3 #. , %./9 11%., =as$atchewan =teel, Ltd. and Alberta Co""er, 8nc. both recently announced earnings of 99,991. Both com"anies have common shares outstanding of 29,999 and rates of return of 19. =as$atchewan =teel has a new "roHect that will generate net cash flows of 9,999 "er year forever. Alberta Co""er has a new "roHect that will generate net cash flows of 9,999 "er year forever. &he stoc$ "rice of =as$atchewan =teel should be greater than the stoc$ "rice of Alberta =teel. B. , 9.9 C. , %./9 . , 19,999 A. , 9.9 #. , 199,999 11., &here is an election being held to fill two seats on the board of directors of a firm in which you hold stoc$. &here are a total of 29 shares outstanding. 8f the election is conducted under cumulative voting and you own 129 shares, how many more shares must you buy to be assured of earning a seat on the board@ C. , 21 A. , 9 B. , 29 . , 51 #. , 11 11., >our directors will be elected and you wish to be one of them. ?ith cumulative voting, what "ercentage of the shares ("lus one) do you need to have on your side to guarantee you a seat@ C. , 29.9 A. , 12. B. , 1/. . , 2.9 #. , %%.% 11/., A firm has 299,999 shares outstanding. 8f three directors will be elected, how many shares do you need to control to assure yourself a seat on the board under cumulative voting "rocedures@ A. , %9,991 B. , 9,991 . , //,//3 #. , 199,991 C. , 9,991 11., =u""ose you own 99 shares of Biogen common stoc$. &wo directors are to be elected. =ince the firm uses cumulative voting, you can cast as many as votes for a single director. E. , 1,999 A. , 199 B. , 29 C. , 99 . , 9 113., our firm is converting from cumulative voting to straight voting. ou currently own the minimum number of shares needed to assure yourself a seat on the board in any election under cumulative voting. Kow many more shares must you "urchase in order to assure yourself a seat under straight voting@ Assume there are a total of 99,999 shares outstanding and that three directors go u" for election at a time. C. , 12,999 A. , 9 B. , 2,999 . , 29,999 #. , 29,991
, 115., Big Kat must have closed at "er share on the "revious trading day. B. , 53.2/ A. , 5.%3 C. , 55.33 . , 53.1%
#. , 53.9
129., >or the current year, the e'"ected dividend "er share is: A. , 1.19 B. , 1.%9 C. , 1.%2 . , 2.19 #. , .9 121., Assume the e'"ected growth rate in dividends is . &hen the constant growth model suggests that the re0uired return on Big Kat stoc$ is: A. , . B. , .5 C. , 3.9 D. , 3. #. , 5.3 122., Based on the 0uote, a good estimate of #!= over the last four 0uarters is: C. , /.1% A. , 9.1/ B. , %.25 . , 3. 12%.,
#. , 5./
, 12., Assume that Big Kat "aid a 1.12 annual dividend in the "revious "eriod. ?hat is the dividend growth rate based on this 0uote@ D. , 1/.9 A. , 1.1/ B. , 12.29 C. , 1.1 #. , 1/.25 12., ou believe that the re0uired return on Big Kat stoc$ is 12 and that the e'"ected dividend growth rate is 19, which is e'"ected to remain constant for the foreseeable future. 8s the stoc$ currently overvalued, undervalued, or fairly "riced@ A. , airly "riced . , Cannot tell without more information 12/., Assume that Big Kat is selling at its e0uilibrium "rice. Also assume that dividends are e'"ected to grow at a constant rate of 2 for the foreseeable future. ?hat is the re0uired return on the stoc$@ A. , 13. B. , 22. C. , 2.1 . , 2. E. , 2/. Bradley Broadcasting e'"ects to "ay dividends of 1.19, 1.21, and 1.%%1 in one, two, and three years, res"ectively. After that, dividends are e'"ected to grow at a constant rate of forever. =toc$s of similar ris$ yield 19. 12., &he "rice of Bradley Broadcasting stoc$ today should be: C. , ;>(.:: A. , 13.3 B. , 15.12 . , 21./ 123., ?hat is growth rate of the Bradley Broadcasting dividend during year 2@ A. , '(@ B. , 1 C. , 29 . , 2 #. , 9 125., Kow much is Bradley-s stoc$ "rice e'"ected to increase during the first year@ B. , 1.*9@ A. , 1.9 C. , .1 . , /.2
#. , 22./
#. , /.1
1%9., ?hat is e'"ected ca"ital gains yield on Bradley Broadcasting stoc$ during year 3@ A. , % B. , C. , 5 . , 19 #. , 1 1%1., &he Mohnson Com"any Hust "aid an annual dividend of 1./9. Kow much would you be willing to "ay for one share of Mohnson Com"any stoc$ if the dividend remains constant and you re0uire a 5 rate of return@ C. , 1.3 A. , 1.9 B. , 1/.%% . , 13.21 #. , 15.%3 1%2., Alhandro, 8nc. Hust "aid an annual dividend of 1.9%. 8t has been increasing its dividends by annually and is e'"ected to continue doing so. Kow much can it e'"ect to receive for each new share of stoc$ offered if investors re0uire an 11 rate of return@ A. , 5.%/ B. , 5. C. , 1.1 #. , 1.51 D. , 1.%9 1%%., &he OL= Co. is e'"ected to "ay the following annual dividends for the ne't three years: 1.99, 1.9, and 1./9, res"ectively. After that time, it is e'"ected to increase its dividends by % annually. =toc$s similar to OL= are yielding 5.. ?hat is one share of OL= worth today@ A. , 22./5 B. , 2%.3 C. , 2.9 . , 2.%9 #. , 25.29 1%., &he Brown Com"any Hust announced that it will be increasing its annual dividend to 1./3 ne't year and that future dividends will be increased by 2. annually. Kow much would you be willing to "ay for one share of the Brown Com"any stoc$ if you re0uire a 12 rate of return@ C. , 1./3 A. , 1.% B. , 1./% . , 13.1% #. , 15.31 1%., &he +8O< Cor". "aid 9.3 in dividends last year. 8t has Hust announced that it e'"ects to increase its dividends by 2 each year for the foreseeable future. Currently, +8O< stoc$ is "riced at 21.%2 "er share. ?hat is the rate of return on +8O< stoc$@ E. , /.92 A. , .91 B. , .5/ C. , .3/ . , .5 1%/., =wanson Brothers e'"ects to "ay a 2.29 dividend ne't year which is an increase of %.2 over the "rior year. After ne't year, dividends are "roHected to grow at a steady rate of 2.. =hares of =wanson stoc$ are currently selling at 1.39 "er share. ?hat is the rate of return on =wanson stoc$@ B. , 1/.2 A. , 1.2 C. , 1/. . , 1.1 #. , 2%.// 1%., =hares of Blue ye, 8nc. are currently "riced at 2%./ a share and "roduce a total return of 1.39. &he annual dividends of Blue ye have been increasing at a rate of 2. and are e'"ected to continue at this rate. ?hat is the e'"ected amount of the ne't dividend@ A. , 1.% B. , 1.51 C. , 2.1 . , 2.3 E. , 2.5% 1%3., +orris, 8nc. has some 3 "referred stoc$ outstanding. &he "ar value of the "referred stoc$ is 199. Kow much are you willing to "ay for one share of +orris "referred stoc$ if you re0uire a rate of return@ C. , 11.25 A. , 3.9 B. , 53.11 . , 12%.3 #. , 12.1 1%5., 7oshima 8ndustries issued dividends totaling 9./9 last year. >or the ne't two years, it e'"ects dividends to increase by 9 annually and then remain constant thereafter. Kow much is one share of 7oshima 8ndustries stoc$ worth today if you re0uire a 5 rate of return@ C. , 1.5 A. , 1%. B. , 1%. . , 1.99 #. , 1.1 19., +O, 8nc. is a high growth firm that has never "aid a dividend. &he com"any Hust issued a "ress release stating that ne't year it "lans on "aying an annual dividend of 9.%. 8t also stated that dividends are e'"ected to increase by 9 a year for each of the following four years and then increase by annually thereafter. &he re0uired rate of return on this stoc$ is 1. ?hat is the e'"ected "rice "er share of +O stoc$ si' years from now@ D. , 12.3 A. , 5.12 B. , 5.2 C. , 12.% #. , 1.1 11., +ahenterin 8nc. is e'"ecting to "ay 1.2%, 9.55, and 1.1% in annual dividends for the ne't three years res"ectively. After that, it "roHects that dividends will increase by 1. annually. Andy is in the 2 marginal ta' brac$et and wants to earn / after;ta' on his investments. Kow much is Andy willing to "ay today for one share of +ahenterin 8nc. stoc$@ A. , 1/.59 B. , 1.9 C. , 1.%1 . , 1.%/ #. , 1.31 12., +ichael-s 8nc. 5 "referred stoc$ is currently "riced at 12.%9. 8f +ichael-s wishes to sell some new "referred stoc$ at "ar, what rate should it assign to the new shares@ B. , .2 A. , /./ C. , 3.9 . , 5.99 #. , 11.15 1%., Mamie Hust "aid 3,2%5 for 199 shares of / "referred stoc$. ?hat rate of return will she earn@ B. , .23 A. , .5 C. , 3.2 . , 19.5 #. , 1%.%
1., &he daily news"a"er lists this information on a stoc$: Last %/.15, 7et Chg ;1./% and ld 1.%. ?hat is the amount of the current dividend@ A. , 9. B. , 9. C. , 9. . , 9.5 #. , 9.2 1., ABC, 8nc. has earnings "er share of 1.. &he news"a"er shows a !# of 2% and a dividend of 1.%5 for shares of ABC, 8nc. stoc$. ?hat is the dividend yield@ A. , %./ B. , %.3 C. , %.5 D. , .2 #. , .% 1/., Leon "urchased 1,999 shares of LMO stoc$ this morning at a "rice of ./ a share. &he stoc$ "aid a dividend last year of 1.39 "er share. Leon-s re0uired rate of return is 1% on this ty"e of investment. ?hat is the ca"ital gains yield on LMO stoc$@ A. , .1 B. , 3.2 . , 1%.3 #. , 1/.5 C. , 5.9/ 1., ABC stoc$ closed yesterday at a "rice of %5.39 a share. &he "rice today was down 2.19. ABC "ays a 9.3 annual dividend which has remained constant for five years. ?hat is the current dividend yield today@ C. , 1.2 A. , 1.1 B. , 1.21 . , 1.%1 #. , 1.%% 13., An 3 "referred stoc$ closed yesterday at a "rice of 51.%2. &he stoc$ closed today at "ar. ?hat is the current dividend yield@ C. , 3.99 A. , .%1 B. , .9 . , 3./ #. , 3.39 15., +arcy owns 199 shares of ee-s 8nc. while &eri owns %99 shares and Lucie owns 99 shares. &here are 599 shares outstanding. &here are currently three seats o"en on the board of directors. ?ith straight voting, how many additional shares will +arcy have to buy from &erri or Lucie to guarantee that she will be elected to the board@ A. , 9 B. , 1 C. , 11 . , 291 E. , %1 19., &here are seats o"en on the board of directors of Al"ha, 8nc. Mason wants to be "ositive that he can be elected to one of these "ositions. Al"ha uses straight voting. &here are 1,99 shares of Al"ha stoc$ outstanding. &wenty of the shares are owned by +idge, %9 are owned by !eter, 19 are owned by Meff, 2 are owned by Mason and the rest are owned by #dward. Kow many additional shares of stoc$ must Mason buy to ensure that he wins a seat@ A. , 9 B. , 21 C. , 253 D. , :?% #. , 11 11., +arcy owns 199 shares of ee-s 8nc. while &eri owns %99 shares and Lucie owns 99 shares. &here are 599 shares outstanding. &here are currently three seats o"en on the board of directors. ?ith cumulative voting, how many additional shares will +arcy have to buy from &eri or Lucie to guarantee that she will be elected to the board@ C. , '>% . , 2/ #. , %1 A. , 9 B. , /% 12., &here are seats o"en on the board of directors of Al"ha, 8nc. Mason wants to be "ositive that he can be elected to one of these "ositions. Al"ha uses cumulative voting. &here are 1,99 shares of Al"ha stoc$ outstanding. &wenty of the shares are owned by +idge, %9 are owned by !eter, 19 are owned by Meff, 2 are owned by Mason and the rest are owned by #dward. Kow many additional shares of stoc$ must Mason buy to ensure that he wins a seat@ A. , ( B. , / C. , 11/ . , 21 #. , %/ 1%., Mac$son =u""ly has 2,99 shares of stoc$ outstanding. &here are three "ositions o"en on the board of directors. Amy wants to be elected to one of those "ositions. Kow many more shares must Amy own to guarantee her election if Mac$son =u""ly uses straight voting as o""osed to cumulative voting@ A. , /2 B. , /2/ C. , 3% . , 129 1., &he Battery Co. "aid 1.29 in dividends last year. +argaret "aid a "rice of 1.99 a share for Battery Co. stoc$ and has an e'"ected return of 3 on this investment. ?hat is the growth rate of the Battery Co. stoc$@ C. , 3 . , 12 #. , 1/ A. , (@ B. , 1., An asset characterized by cash flows that increase at a constant rate forever is called a: . , "er"etuity due. #. , "referred stoc$.
A. , growing perpetuity. B. , growing annuity. C. , common annuity.
1/., &he stoc$ valuation model that determines the current stoc$ "rice by dividing the ne't annual dividend amount by the e'cess of the discount rate less the dividend growth B. , dividend growth C. , ca"ital "ricing rate is called the model. A. , zero growth . , earnings ca"italization #. , discounted dividend 1., 7e't year-s annual dividend divided by the current stoc$ "rice is called the: C. , dividend yield. A. , yield to maturity. B. , total yield. . , ca"ital gains yield.
#. , earnings yield.
13., &he rate at which a stoc$-s "rice is e'"ected to a""reciate (or de"reciate) is called the yield. D. , ca"ital gains A. , current B. , total C. , dividend #. , earnings 15., A form of e0uity which receives "referential treatment in the "ayment of dividends is called stoc$. A. , dual class B. , cumulative C. , deferred #. , common D. , "referred 1/9., A is a form of e0uity security that has a stated li0uidating value.
A. , bond B. , debenture
C. , "ro'y . , common stoc$
E. , "referred stoc$
1/1., A form of e0uity which receives no "referential treatment in either the "ayment of dividends or in ban$ru"tcy distributions is called stoc$. A. , dual class B. , cumulative C. , deferred . , "referred E. , common 1/2., &he voting "rocedure where you must own 9 "lus one of the outstanding shares of stoc$ to guarantee that you will win a seat on the board of directors is called C. , straight voting. A. , democratic B. , cumulative . , deferred #. , "ro'y 1/%., &he Mames 6iver Co. "ays an annual dividend of 1.9 "er share on its common stoc$. &his dividend amount has been constant for the "ast 1 years and is e'"ected to remain constant. Given this, one share of Mames 6iver Co. stoc$: A. , is basically worthless as it offers no growth "otential. B. , has a mar$et value e0ual to the "resent value of 1.9 "aid one year from today. C. , is valued as if the dividend "aid is a "er"etuity. . , is valued with an assumed growth rate of %. #. , has a mar$et value of 1.99. 1/., &he common stoc$ of the Oenwith Co. "ays a constant annual dividend. &hus, the mar$et "rice of Oenwith stoc$ will: A. , also remain constant. B. , increase over time. C. , decrease over time. . , increase when the mar$et rate of return increases. E. , decrease when the mar$et rate of return increases. 1/., &he Ooster Co. currently "ays an annual dividend of 1.99 and "lans on increasing that amount by each year. &he Oeyser Co. currently "ays an annual dividend of 1.99 and "lans on increasing its dividend by % annually. Given this, it can be stated with certainty that the of the Ooster Co. stoc$ is greater than the of the Oeyser Co. stoc$. C. , rate of capital gain< rate of capital gain A. , mar$et "riceN mar$et "rice B. , dividend yieldN dividend yield . , total returnN total return #. , ca"ital gainsN dividend yield
1//., &he dividend growth model: &. assues that dividends increase at a constant rate forever. &&. can !e used to copute a stock price at any point of tie.
888. states that the mar$et "rice of a stoc$ is only affected by the amount of the dividend. 8J. considers ca"ital gains but ignores the dividend yield. A. , 8 only B. , 88 only C. , 888 and 8J only D. , & and && only
#. , 8, 88, and 888 only
1/., &he underlying assum"tion of the dividend growth model is that a stoc$ is worth: A. , the same amount to every investor regardless of their desired rate of return. B. , the present value of the future incoe which the stock generates. C. , an amount com"uted as the ne't annual dividend divided by the mar$et rate of return. . , the same amount as any other stoc$ that "ays the same current dividend and has the same re0uired rate of return. #. , an amount com"uted as the ne't annual dividend divided by the re0uired rate of return. 1/3., Assume that you are using the dividend growth model to value stoc$s. 8f you e'"ect the mar$et rate of return to increase across the board on all e0uity securities, then you should also e'"ect the: A. , mar$et values of all stoc$s to increase, all else constant. B. , mar$et values of all stoc$s to remain constant as the dividend growth will offset the increase in the mar$et rate. C. , arket values of all stocks to decrease, all else constant.
. , stoc$s that do not "ay dividends to decrease in "rice while the dividend;"aying stoc$s maintain a constant "rice. #. , dividend growth rates to increase to offset this change. 1/5., Latcher-s 8nc. is a relatively new firm that is still in a "eriod of ra"id develo"ment. &he com"any "lans on retaining all of its earnings for the ne't si' years. =even years from now, the com"any "roHects "aying an annual dividend of .2 a share and then increasing that amount by % annually thereafter. &o value this stoc$ as of today, you would most li$ely determine the value of the stoc$ years from today before determining today-s value. C. , / A. , B. , . , #. , 3 19., &he 6obert !hilli"s Co. currently "ays no dividend. &he com"any is antici"ating dividends of 9, 9, 9, .19, .29, and .%9 over the ne't / years, res"ectively. After that, the com"any antici"ates increasing the dividend by annually. &he first ste" in com"uting the value of this stoc$ today, is to com"ute the value of the stoc$ in year: A. , %. B. , . C. , . #. , . D. , /. 11., =u"ernormal growth refers to a firm that increases its dividend by: B. , a rate which is most li$ely not sustainable over an e'tended "eriod of time. A. , three or more "er year. C. , a constant rate of 2 or more "er year. . , .19 or more "er year. #. , an amount in e'cess of .19 a year. 12., &he total rate of return earned on a stoc$ is com"rised of which two of the following@ 8. current yield 88. yield to maturity &&&. dividend yield &5. capital gains yield
A. , 8 and 88 only
B. , 8 and 8J only
C. , 88 and 888 only
. , 88 and 8J only
E. , 888 and 8J only
1%., &he total rate of return on a stoc$ can be "ositive even when the "rice of the stoc$ de"reciates because of the: C. , dividend yield. A. , ca"ital a""reciation. B. , interest yield. . , su"ernormal growth. #. , real rate of return. 1., >red >lintloc$ wants to earn a total of 19 on his investments. Ke recently "urchased shares of ABC stoc$ at a "rice of 29 a share. &he stoc$ "ays a 1 a year dividend. &he "rice of ABC stoc$ needs to if >red is to achieve his 19 rate of return. A. , remain constant B. , decrease by C. , increase by . , increase by 19 #. , increase by 1 1., ?hich one of the following correctly defines the dividend growth model@ A. , !9 D 9
(6 ; g)
B. , D !9 F (6 ; g)
C. , 6 D (!9
9) E g
D. , 6 3 D '
P( 0 g
#. , !9 D (1
6) E g
1/., =hareholders generally have the right to: &. elect the corporate directors.
88. select the senior management of the firm. 888. elect the chief e'ecutive officer (C#<). 8J. elect the chief o"erating officer (C<<). B. , 8 and 888 only C. , 88 only A. , 8 only
. , 8 and 88 only
#. , 888 and 8J only
1., Mac$ owns % shares of stoc$ in Beta, 8nc. and wants to e'ercise as much control as "ossible over the com"any. Beta, 8nc. has a total of 199 shares of stoc$ outstanding. #ach share receives one vote. !resently, the com"any is voting to elect two new directors. ?hich one of the following statements must be true given this information@ A. , 8f straight voting a""lies, Mac$ is assured one seat on the board. B. , 8f straight voting a""lies, Mac$ can control both o"en seats. C. , &f cuulative voting applies, ack is assured one seat on the !oard. . , 8f cumulative voting a""lies, Mac$ can control both o"en seats. #. , 6egardless of the ty"e of voting em"loyed, Mac$ does not own enough shares to control any of the seats. 13., ABC Co. is owned by a grou" of shareholders, all of whom vote inde"endently and all of whom want "ersonal control over the firm. 8f straight voting is used, a shareholder: A. , ust either own enough shares to totally control the elections or else he+she has no control whatsoever.
B. , will be able to elect at least one director as long as there are at least three o"en "ositions and the shareholder owns at least 2 "lus one of the outstanding shares. C. , must own at least two;thirds of the shares, "lus one, to e'ercise control over the elections. . , is only "ermitted to elect one director, regardless of the number of shares owned. #. , who owns more shares than anyone else, regardless of the number of shares owned, will control the elections. 15., &he *ilo Cor". has 1,999 shareholders and is "re"aring to elect three new board members. ou do not own enough shares to control the elections but are determined to oust the current leadershi". &he most li$ely result of this situation is a: A. , negotiated settlement where you are granted control over one of the three o"en "ositions. B. , legal battle for control of the firm based on your discontent as an individual shareholder. C. , arbitrated settlement whereby you are granted control over one of the three o"en "ositions. E. , pro#y fight for control of the fir. . , total loss of "ower for you since you are a minority shareholder.
139., Common stoc$ shareholders are generally granted rights which include the right to: 8. share in com"any "rofits. 88. vote for com"any directors. 888. vote on "ro"osed mergers. 8J. residual assets in a li0uidation. A. , 8 and 88 only B. , 88 and 888 only C. , 8 and 8J only . , 8, 88, and 8J only
E. , &, &&, &&&, and &5
131., &he =cott Co. has a general dividend "olicy whereby it "ays a constant annual dividend of 1 "er share of common stoc$. &he firm has 1,999 shares of stoc$ outstanding. &he com"any: A. , must always show a current liability of 1,999 for dividends "ayable. B. , is obligated to continue "aying 1 "er share "er year. C. , will be declared in default and can face ban$ru"tcy if it does not "ay 1 "er year to each shareholder on a timely basis. . , has a liability which must be "aid at a later date should the com"any miss "aying an annual dividend "ayment. E. , ust still declare each dividend !efore it !ecoes an actual copany lia!ility.
132., &he dividends "aid by a cor"oration: &. to an individual !ecoes ta#a!le incoe of that individual.
88. reduce the ta'able income of the cor"oration. 888. are declared by the chief financial officer of the cor"oration. &5. to another corporation ay or ay not represent ta#a!le incoe to the recipient. B. , & and &5 only A. , 8 only C. , 88 and 888 only . , 8, 88, and 8J only
#. , 8, 888, and 8J only
13%., &he owner of "referred stoc$: A. , is entitled to a distri!ution of incoe prior to the coon shareholders.
B. , has the right to veto the outcome of an election held by the common shareholders. C. , has the right to declare the com"any ban$ru"t whenever there are insufficient funds to "ay dividends to the common shareholders. . , receives ta';free dividends if it is an individual and own more than 29 of the outstanding "referred shares. #. , has the right to collect "ayment on any un"aid dividends as long as the stoc$ is noncumulative "referred. 13., A / "referred stoc$ "ays a year in dividends "er share. &he "ar value of the "referred stoc$ is 199.
A. , %
B. , ;%
C. , 12
. , %9
#. , /9
13., ?hich one of the following statements concerning "referred stoc$ is correct@ A. , n"aid "referred dividends are a liability of the firm. B. , !referred dividends must be "aid 0uarterly "rovided the firm has net income that e'ceeds the amount of the 0uarterly dividend. C. , !referred dividends must be "aid timely each 0uarter or the un"aid dividends start accruing interest. . , All un"aid dividends on "referred stoc$, regardless of the ty"e of "referred, must be "aid before any income can be distributed to common shareholders. E. , Preferred shareholders ay !e granted voting rights and seats on the !oard if preferred dividend payents reain unpaid.
13/., 8n a li0uidation, each share of "referred stoc$ is generally entitled to a li0uidation "ayment of as long as there are sufficient funds available. &he "ar value of the "referred stoc$ is 199. A. , 1 B. , C. , 19 . , 9 E. , ;'(( 13., &he closing "rice of a stoc$ is 0uoted at 22.3, with a !# of 2/ and a net change of 1.2. Based on this information, which one of the following statements is correct@ A. , &he closing "rice on the "revious day was 1.2 higher than today-s closing "rice. B. , A dealer will buy the stoc$ at 22.3 and sell it at 2/ a share. C. , &he stoc$ increased in value between yesterday-s close and today-s close by .912. D. , The earnings per share are e)ual to '+>% th of ;>>.=?. #. , &he earnings "er share have increased by 1.2 this year. 133., A stoc$ listing contains the following information: !# 1., closing "rice %%.19, dividend .39, & chg %., and a net chg of ;.9. ?hich of the following statements are correct given this information@ &. The stock price has increased !y :.1@ during the current year.
88. &he closing "rice on the "revious trading day was %2./9. &&&. The earnings per share are appro#iately ;'.=9.
8J. &he current yield is 1.. B. , & and &&& only A. , 8 and 88 only
C. , 88 and 888 only
. , 888 and 8J only
#. , 8, 888, and 8J only
135., Angelina-s made two announcements concerning its common stoc$ today. >irst, the com"any announced that its ne't annual dividend has been set at 2.1/ a share. =econdly, the com"any announced that all future dividends will increase by annually. ?hat is the ma'imum amount you should "ay to "urchase a share of Angelina-s stoc$ if E. , ;:%.(( your goal is to earn a 19 rate of return@ A. , 21./9 B. , 22./ C. , 2. . , %./2 159., Kow much are you willing to "ay for one share of stoc$ if the com"any Hust "aid a .39 annual dividend, the dividends increase by annually and you re0uire an 3 rate of return@ A. , 15.2% B. , 29.99 C. , 29.9 #. , 21./% D. , ;>(.=( 151., Lee Kong 8m"orts "aid a 1.99 "er share annual dividend last wee$. ividends are e'"ected to increase by annually. ?hat is one share of this stoc$ worth to you today D. , ;''.%? if the a""ro"riate discount rate is 1@ A. , .1 B. , .9 C. , 11.11 #. , 12.2 152., +aHestic Komes stoc$ traditionally "rovides an 3 rate of return. &he com"any Hust "aid a 2 a year dividend, which is e'"ected to increase by "er year. 8f you are "lanning on buying 1,999 shares of this stoc$ ne't year, how much should you e'"ect to "ay "er share if the mar$et rate of return for this ty"e of security is 5 at the time of your B. , 2.9 "urchase@ A. , 3./9 C. , .1% . , .35 #. , 9.99 15%., +artin-s achts has "aid annual dividends of 1.9, 1., and 2.99 a share over the "ast three years, res"ectively. &he com"any now "redicts that it will maintain a constant dividend since its business has leveled off and sales are e'"ected to remain relatively constant. Given the lac$ of future growth, you will only buy this stoc$ if you can earn at least a 1 rate of return. ?hat is the ma'imum amount you are willing to "ay to buy one share of this stoc$ today@ B. , 1%.%% A. , 19.99 C. , 1/./ . , 13.33 #. , 29.99 15., &he current yield on Al"ha-s common stoc$ is .3. &he com"any Hust "aid a 2.19 dividend. &he rumour is that the dividend will be 2.29 ne't year. &he dividend growth rate is e'"ected to remain constant at the current level. ?hat is the re0uired rate of return on Al"ha-s stoc$@ A. , '(.(1@ B. , 1/.9 C. , 21.33 . , %. #. , .5 15., +athilda-s Jineyard recently "aid a %./9 annual dividend on its common stoc$. &his dividend increases at an average rate of %. "er year. &he stoc$ is currently selling E. , 9.*@ for /2.19 a share. ?hat is the mar$et rate of return@ A. , 2. B. , %. C. , . . , /.9
15/., Bet-6 Bilt Bi$es Hust announced that its annual dividend for this coming year will be 2.2 a share and that all future dividends are e'"ected to increase by 2. annually. D. , ':.*@ ?hat is the mar$et rate of return if this stoc$ is currently selling for 22 a share@ A. , 5. B. , 11.9 C. , 12. #. , 1.9 15., &he common stoc$ of Grady Co. returned an 11.2 rate of return last year. &he dividend amount was .9 a share which e0uated to a dividend yield of 1.. ?hat was the rate of "rice a""reciation on the stoc$@ C. , 9.?*@ A. , 1.9 B. , 3.99 . , 11.2 #. , 12. 153., &he common stoc$ of #nergizer-s "ays an annual dividend that is e'"ected to increase by 19 annually. &he stoc$ commands a mar$et rate of return of 12 and sells for /9.9 a share. ?hat is the e'"ected amount of the ne't dividend to be "aid on #nergizer-s common stoc$@ D. , ;'.>' A. , .59 B. , 1.99 C. , 1.19 #. , 1.%% 155., &he 6eading Co. has ado"ted a "olicy of increasing the annual dividend on its common stoc$ at a constant rate of % annually. &he last dividend it "aid was 9.59 a share. ?hat will its dividend be in si' years@ A. , .59 B. , .5% C. , 1.9 . , 1.9 E. , ;'.'' 299., A stoc$ "ays a constant annual dividend and sells for %1.11 a share. 8f the rate of return on this stoc$ is 5, what is the dividend amount@ E. , ;>.=( A. , 1.9 B. , 1.39 C. , 2.29 . , 2.9 291., ou have decided that you would li$e to own some shares of GK Cor". but need an e'"ected 12 rate of return to com"ensate for the "erceived ris$ of such ownershi". ?hat is the ma'imum you are willing to s"end "er share to buy GK stoc$ if the com"any "ays a constant %.9 annual dividend "er share@ B. , ;>9.'? A. , 2/.9 C. , %2./ . , %.25 #. , %/.5 292., &urni"s and !arsley common stoc$ sells for %5.3/ a share at a mar$et rate of return of 5.. &he com"any Hust "aid its annual dividend of 1.29. ?hat is the rate of growth of its dividend@ A. , .2 B. , . C. , .5 . , /.9 E. , %.:@ 29%., ?ilbert-s Clothing =tores Hust "aid a 1.29 annual dividend. &he com"any has a "olicy whereby the dividend increases by 2. annually. ou would li$e to "urchase 199 shares of stoc$ in this firm but realize that you will not have the funds to do so for another three years. 8f you desire a 19 rate of return, how much should you e'"ect to "ay for 199 shares when you can afford to buy this stoc$@ 8gnore trading costs. A. , 1,/9 B. , 1,/31 C. , 1,2% #. , 1,319 D. , 1,// 29., &he +erriweather Co. Hust announced that it is increasing its annual dividend to 1./9 and establishing a "olicy whereby the dividend will increase by %. annually thereafter. Kow much will one share of this stoc$ be worth five years from now if the re0uired rate of return is 12@ B. , 22.%/ A. , 21./9 C. , 2%.1 . , 2%.5 #. , 2.5 29., =hares of the Oatydid Co. common stoc$ are currently selling for 2.%. &he last dividend "aid was 1./9 "er share. &he mar$et rate of return is 19. At what rate is the B. , 1.((@ dividend growing@ A. , 2.9 C. , .53 . , 1%.9 #. , 1.51 29/., &he #'treme 6eaches Cor". last "aid a 1.9 "er share annual dividend. &he com"any is "lanning on "aying %.99, .99, .9, and 19.99 a share over the ne't four years, res"ectively. After that the dividend will be a constant 2.9 "er share "er year. ?hat is the mar$et "rice of this stoc$ if the mar$et rate of return is 1@ C. , 2/. A. , 1.9 B. , 22.%5 . , 25.93 #. , %%.1 29., Can-t Kold +e Bac$, 8nc. is "re"aring to "ay its first dividends. 8t is going to "ay 1.99, 2.9, and .99 a share over the ne't three years, res"ectively. After that, the com"any has stated that the annual dividend will be 1.2 "er share indefinitely. ?hat is this stoc$ worth to you "er share if you demand a rate of return@ A. , .29 B. , 1.3 C. , 13.33 #. , 2.9/ D. , 21.3 293., 7ow or Later, 8nc. recently "aid 1.19 as an annual dividend. >uture dividends are "roHected at 1.1, 1.13, 1.22, and 1.2 over the ne't four years, res"ectively. Beginning five years from now, the dividend is e'"ected to increase by 2 annually. ?hat is one share of this stoc$ worth to you if you re0uire an 3 rate of return on similar investments@ A. , 1./2 C. , 21.21 . , 2%.%% #. , 2.53 B. , 15. 295., Bill Bailey and =ons "ays no dividend at the "resent time. &he com"any "lans to start "aying an annual dividend in the amount of .%9 a share for two years commencing two years from today. After that time, the com"any "lans on "aying a constant 1 a share dividend indefinitely. Kow much are you willing to "ay to buy a share of this stoc$ if your re0uired return is 1@ A. , .32 C. , .%5 . , ./ #. , .3 B. , .2 219., &he Lighthouse Co. is in a downsizing mode. &he com"any "aid a 2.9 annual dividend last year. &he com"any has announced "lans to lower the dividend by .9 a year. .1: 212., BC -n Hust "aid its annual dividend of ./9 a share. &he "roHected dividends for the ne't five years are .%9, .9, ., 1.99, and 1.29, res"ectively. After that time, the dividends will be held constant at 1.9. ?hat is this stoc$ worth today at a / discount rate@ A. , 29.3 B. , 29./9 C. , 21.92 . , 21.23 #. , 21.% 21%., Bea$sley, 8nc. is a very cyclical ty"e of business which is reflected in its dividend "olicy. &he firm "ays a 2.99 a share dividend every other year. &he last dividend was "aid last year. >ive years from now, the com"any is re"urchasing all of the outstanding shares at a "rice of 9 a share. At an 3 rate of return, what is this stoc$ worth today@ B. , %.21 A. , %.9% C. , %.3 . , 3.95 #. , %.13 21., 7u;&e$, 8nc. is e'"ecting a "eriod of intense growth, so it has decided to retain more of its earnings to hel" finance that growth. As a result it is going to reduce its annual dividend by 19 a year for the ne't three years. After that it will maintain a constant dividend of .9 a share. Last year, the com"any "aid 1.39 "er share. ?hat is the mar$et value of this stoc$ if the re0uired rate of return is 1%@ B. , .22 A. , /.5 C. , 3.22 . , 3.3 #. , 5.91 21., &he ouble i" Co. is e'"ecting its ice cream sales to decline due to the increased interest in healthy eating. &hus, the com"any has announced that it will be reducing its annual dividend by a year for the ne't two years. After that, it will maintain a constant dividend of 1 a share. Last year, the com"any "aid 1.9 "er share. ?hat is this stoc$ C. , ;''.%1 worth to you if you re0uire a 5 rate of return@ A. , 19.3/ B. , 11.11 . , 12.53 #. , 1.2%
