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, An asset characterized by cash flows that increase at a constant rate forever is called a:

A. , Growing perpetuity.

B. , Growing annuity.

C. , Common annuity.

D. , Perpetuity due.

E. , Preferred stock.

13., The stock valuation model that determines the current stock price as the next dividend divided by the (discount rate less the dividend growth rate) is called the:

A. , Zero growth model.

B. , Dividend growth model.

C. , Capital Asset Pricing Model. D. , Earnings capitalization model.

E. , Perpetual growth model.

14., A stock's next expected dividend divided by the current stock price is the:

A. , Current yield.

B. , Total yield.

C. , Dividend yield. D. , Capital gains yield.

E. , Earnings yield.

15., The rate at which the stock price is expected to appreciate (or depreciate) is the:

A. , Current yield.

B. , Total yield.

C. , Dividend yield. D. , Capital gains yield.

E. , Earnings yield.

16., Equity without priority for dividends or in the event of bankruptcy is called:

A. , Dual class stock. B. , Cumulative stock.C. , Deferred stock. D. , Preferred stock. E. , Common stock.

17., The term __________ is usually applied to stock that has no special preference either in paying dividends or in bankruptcy.

A. , preferred stock B. , debenture

C. , common stock D. , cumulative voting

E. , proxy

18., "Preemptive rights" refers to:

A. , The right of shareholders to share proportionately in dividends paid.

C. , The right of shareholders to share proportionately in liquidated assets.

E. , The right to redeem shares.

B. , The right of shareholders to share proportionately in any new stock issues sold.

D. , The right of shareholders to vote at annual shareholder meetings.

19., Payments made by a corporation to its shareholders, in the form of either cash, stock, or payments in kind, are called:

A. , Retained earnings.

B. , Net income.

C. , Dividends.

D. , Redistributions. E. , Infused equity.

20., Equity with differential voting rights and/or dividend payment claims is called:

A. , Dual class stock. B. , Cumulative stock.C. , Deferred stock. D. , Preferred stock. E. , Common stock.

21., Equity with priority for dividends and in the event of bankruptcy is called:

A. , Dual class stock. B. , Cumulative stock.C. , Deferred stock. D. , Preferred stock. E. , Common stock.

22., The short alphabetic abbreviation for an exchange-listed stock by which the issue is identified in the market is called the stock's _____________.

A. , Open name.

B. , Trading range. C. , Exchange name. D. , Ticker symbol. E. , Price/earnings description

23., The voting procedure where shareholders may cast all of their votes for one member of the board is:

A. , Democratic voting.

B. , Cumulative voting.

C. , Straight voting. D. , Deferred voting. E. , Proxy voting.

24., The voting procedure where shareholders may cast all of their votes for each member of the board is:

A. , Democratic voting.

B. , Cumulative voting.

C. , Straight voting. D. , Deferred voting. E. , Proxy voting.

25., The voting procedure where shareholders grant authority to another individual to vote their shares is called:

A. , Democratic voting.

B. , Cumulative voting.

C. , Straight voting.

D. , Deferred voting.

E. , Proxy voting.

26., A stock whose price can be computed by dividing the annual dividend amount by the required rate of return is called a _______ growth stock.

A. , Constant.

B. , Supernormal.

C. , Zero. D. , Capital gains.

E. , Dividend.

27., Preferred stock is a type of _______ growth stock.

A. , Constant.

B. , Zero.

C. , Supernormal.

D. , Capital gains.

E. , Dividend.

28., Given a price at year 5, the dividend in the dividend growth model would be defined as:

A. , The last annual dividend paid.

B. , The annual dividend in year 1.

C. , The quarterly dividend in year 5.

E. , The annual dividend in year 6.

29., The capital gains yield as used in the dividend growth model is defined as:

E. , g/P0.

D. , g.

30., The procedure which has the effect of permitting minority participation in voting is called ____ voting.

A. , Proxy.

B. , Cumulative.

C. , Straight.

D. , Preferred.

E. , Freeze out.

31., A cumulative dividend is defined as a dividend that is:

A. , Carried forward as an arrearage if not paid.

B. , Payable only if current operations generate sufficient cash in a year to pay the dividend.

C. , Paid only to senior holders of common stock.

D. , Treated as an interest expense.

E. , Paid as an extra payment if the share of stock is called.

32., Which of the following is true of non-voting common stock?

A. , It is not legal in Canada to issue common stock without voting rights.

C. , Non-voting common stockholders must be paid a dividend each year.

E. , Non-voting shares commonly sell at a premium over voting shares.

B. , A "coattail" provision requires that 2/3 of all common stock carry voting rights.

D. , Non-voting shares must receive dividends no lower than dividends on voting shares.

A. , The capital gains yield plus the dividend yield.

B. , Next year's dividend divided by the current price.

C. , The increase in the value of a share of stock over a period of time.

D. , The rate at which a stock increases in value.

E. , The payment by a corporation to shareholders in the form of cash or stock.

34., A grant of authority by a shareholder allowing for another individual to vote his/her shares is a _____________.

A. , Preferred stock. B. , Proxy. C. , Specialist.

D. , Cumulative voting right.

E. , Dual class stock.

35., Which of the following is a legitimate reason the valuation of common stock is generally harder than the valuation of bonds?

I. Future cash flows on stocks are not known in advance.

II. Common stocks don't have a maturity date.

III. Common stock valuation is sensitive to estimates of the dividend growth rate.

A. , I only

B. , I and II only

C. , I and III only

D. , II and III only

E. , I, II, and III

36., Which of the following is true about the differences between debt and common stock?

A. , Debt is ownership in a firm but equity is not.

B. , Creditors have voting power while stockholders do not.

C. , Periodic payments made to either class of security are tax deductible for the issuer. D. , Interest payments are promised while dividend payments are not.

E. , Bondholders can also own equity, but not vice versa.

37., You are considering investing in a firm and wish to place a value on the common stock. The dividend on the firm's stock has not changed in the last five years. Absent any

information suggesting future changes in the dividend rate, the most appropriate stock valuation model would be the ___________ model.

A. , Zero growth.

B. , Supernormal growth.

C. , Non-constant growth.

D. , Growing perpetuity.

E. , Bond pricing.

38., Over the past four years, a company has paid dividends of $1.00, $1.10, $1.20, and $1.30, respectively. This pattern is expected to continue into the future. This is an example

of a company paying a:

A. , Dividend that grows by 10% each year. B. , Dividend that grows at a constant rate. C. , Dividend that grows by a decreasing amount.

D. , Dividend that grows at a decreasing rate.

E. , Preferred stock dividend.

39., Dividends on the common stock of Stable Inc. are expected to grow at a constant rate forever. If you are told Stable's most recent dividend paid, its dividend growth rate, and

a discount rate, you can calculate ____________.

I. The price today.

II. The price five years from now.

III. The dividend that is expected to be paid 10 years from now.

A. , I only

B. , I and II only

C. , I and III only

D. , II and III only

E. , I, II, and III

40., Which of the following is (are) true?

I. The dividend growth model only holds if, at some point in time, the dividend growth rate exceeds the stock's required return.

II. A decrease in the dividend growth rate will increase a stock's market value, all else the same.

III. An increase in the required return on a stock will decrease its market value, all else the same.

A. , I only

B. , III only

C. , II and III only

D. , I and III only

E. , I, II, and III

41., You are attempting to value a stock in an industry where firms are generating exceptional dividend growth, but this growth is expected to slow to an equilibrium growth rate

in about five years. Of the stock valuation models studied, the most appropriate is the _______________.

A. , Perpetuity model.

B. , Constant growth model.

C. , Supernormal growth model.

D. , Perpetual growth model.

E. , Preferred stock model.

42., As illustrated using the dividend growth model, the total return on a share of common stock is comprised of a ________________.

A. , Capital gains yield and a dividend growth rate.

B. , Capital gains growth rate and a dividend growth rate.

C. , Dividend payout ratio and a required rate of return. D. , Dividend yield and the present dividend.

E. , Dividend yield and a capital gains yield.

43., Which of the following is (are) true?

I. The dividend yield on a stock is the annual dividend divided by the par value.

II. When the constant dividend growth model holds, g = capital gains yield.

III. The total return on a share of stock = dividend yield + capital gains yield.

A. , I only B. , II only C. , I and II only

D. , II and III only E. , I, II, and III

44., Given no change in required returns, the price of a stock whose dividend is constant will:

A. , Increase over time at a rate of r%.

B. , Decrease over time at a rate of r%.

C. , Increase over time at a rate equal to the dividend growth rate.

D. , Decrease over time at a rate equal to the dividend growth rate.

E. , Remain unchanged.

45., Assume the anticipated growth rate in dividends is constant for Fly-By-Nite Airlines. The expected value of the firm's stock at the end of four years (P 4) is:

I. D5/(r - g)

II. P0 (1 + g)4

III. D0 (1 + g)/(r - g)

A. , I only B. , II only

C. , I and II only

D. , I and III only

E. , I, II, and III

46., You are attempting to value the shares of a new, high-technology firm in a developing industry. You would MOST likely:

A. , Use the growth dividend model.

B. , Use the non-constant growth dividend model.

C. , Use the zero growth dividend model.

D. , Find the value by valuing the stock as a perpetuity.

E. , Not be able to value this company.

47., Which of the following common shareholder rights kicks in when a merger is proposed?

A. , The right to share proportionately in dividends paid.

B. , The right to share proportionately in remaining assets from a liquidation.

C. , The right to vote for directors.

D. , Preference over preferred shareholders in the payment of dividends.

E. , The right to vote on shareholder matters of great importance.

48., Which of the following is NOT usually a right of a common stockholder?

A. , Right of first refusal to buy new preferred stock, when issued.

B. , Preemptive right. C. , Right to receive proportionate dividends, when paid.

D. , Right to claim proportionate remaining assets from a liquidation.

E. , Right to vote by proxy.

49., You just voted against a merger proposal made by another corporation. You must own:

A. , Preferred stock. B. , Debentures.

C. , Common stock. D. , Cumulative dividend stock. E. , Class B stock.

50., As a common shareholder in a firm, which of the following allows you to share proportionately in any new stock sold?

A. , Proxy voting.

B. , Preemptive right.

C. , Cumulative voting.

D. , Straight voting. E. , Dual class stock.

51., Which of the following is/are true about common stock dividends?

I. Payment of dividends is a tax deductible business expense for a corporation.

II. Dividends that have been declared but are not yet paid are liabilities of the corporation.

III. Dividends received by both individuals and corporations are fully taxable.

A. , II only

B. , III only

C. , I and III only

D. , II and III only

E. , I, II, and III

A. , Preferred stock dividends often represent a tax-advantaged investment for some corporations.

B. , Dividends paid to shareholders represent a return on the capital directly or indirectly contributed to the corporation by shareholders.

C. , The payment of dividends is at the discretion of the board of directors.

D. , The payment of dividends by the corporation is not a tax-deductible business expense.

E. , A corporation can be sued for not paying undeclared dividends.

53., The primary reason for creating dual or multiple classes of stock has to do with:

A. , Exchange listing requirements.

B. , Satisfying TSX bylaws.

C. , Freezing out minority shareholders.

54., Often, a firm creates a second class of stock that has ___________ as compared with the first class.

A. , A lower priority in liquidation

B. , The right to cumulative dividends

C. , Unequal voting rights

55., Which of the following is NEVER a right of an owner of a share of preferred stock?

I. The right to share proportionately in preferred dividends paid.

II. The right to share proportionately in remaining assets from a liquidation.

III. The right to vote for directors.

A. , I only

B. , III only

C. , I and II only

D. , II and III only

E. , I and III only

56., Which of the following does NOT correctly complete this sentence: Preferred stock is much like debt in that ______________.

A. , Both frequently carry credit ratings

B. , Both can be repaid using a sinking fund C. , Both receive a stated payment from the corporation during the year

D. , Both payments are subject to the same tax treatment for the issuing firm

E. , The holders of both get a stated payment in the event of a liquidation

57., Which of the following is a true statement regarding publicly traded stocks and bonds?

A. , A share of preferred stock is generally easier to value than a share of common stock. B. , The price of a stock is greater than the present value of all future dividends.

C. , Stock dividends are a legally-binding liability of the corporation.

D. , A share of preferred stock represents an ownership interest in a corporation.

E. , Preferred stock is more like common stock than it is like a bond.

58., Which of the following typically applies to preferred stock but NOT to common stock?

A. , Par value.

B. , Dividend yield. C. , Cumulative dividends.

D. , It is legally considered equity.

59., Which of the following terms is typically associated with BOTH preferred stock and common stock?

A. , Proxy.

B. , Voting rights.

C. , Dividend yield. D. , Arrearage.

E. , Cumulative voting.

60., Which of the following is NOT a right of an owner of a share of common stock?

A. , The right to share proportionately in dividends paid.

B. , The right to share proportionately in remaining assets from a liquidation.

C. , The right to vote for directors.

D. , Preference over preferred shareholders in the payment of dividends.

E. , The right to vote on stockholder matters of great importance.

61., Which of the following would be considered a violation of the rights of one or more classes of a firm's stakeholders?

A. , Common dividends are paid even though preferred dividends are in arrears.

B. , Preferred stockholders are paid before common shareholders in a liquidation.

C. , Common stockholders are able to place members on the board of directors to represent their interests in opposition to the board candidates backed by preferred shareholders.

D. , Common shareholders are able to vote by proxy even when they are unable to attend a shareholders' meeting in person.

E. , Debt is repaid before preferred shareholders are paid anything in a liquidation.

62., Which of the following items does NOT usually appear in a National Post common stock quote?

A. , Capital gains rate.

B. , Dividend yield. C. , Closing price.

D. , High and low price for the trading day. E. , Number of shares traded (volume).

63., If two stocks have the same earnings per share and required rate of return, differences in the ____________ of the two companies can account for different stock prices.

A. , Voting rights.

B. , Growth opportunities.

C. , Number of shares outstanding.

D. , Number of directors.

E. , Value of preferred stock.

64., ____________ can freeze out minority shareholders.

A. , Straight voting. B. , Cumulative dividends.

C. , Proxy voting.

D. , Cumulative voting.

65., You wish to be on the board of directors of a company. If you wish to buy as low a percentage of the total outstanding shares as is necessary to guarantee yourself a seat on

the board, you should look for a firm that has ____________.

A. , Cumulative preferred stock. B. , Cumulative voting Class B stock.

C. , Convertible debentures.

D. , Straight voting common stock.

E. , Cumulative voting common stock.

66., It is more difficult to value a stock than it is to value a bond because:

A. , The future cash flows of a stock are known.

B. , The life of an equity security is limited. C. , The required market rate of return on a stock is known in advance.

D. , Equity securities have no maturity date.

E. , The maturity value of a stock is known.

67., The ABC Co. has paid annual dividends of $0.30, $0.64, $1.20, and $1.45 over the past four years. Dividends in the future are expected to grow at a constant rate of 3.5%.

Which one of the following formulas should be used to compute the value of the stock today?

A. , P0 = D1/(1 + r)1 + D2/(1 + r)2 ... + Dn/(1 + r)n + Pn/(1 + r)n

B. , P0 = D/r

C. , P0 = D1/(1 + r)n + g

D. , P0 = D1/(r - g)

E. , P0 = D1/(r - g)n

68., A supernormal growth stock generally:

A. , Is associated with a company that is experiencing rapid contraction.

B. , Tends to increase its dividends per share by 30% or more for an extended number of years.

C. , Has high growth dividends only for a limited number of years. D. , Has dividends that grow at a high rate for the life of the stock.

E. , Is valued using the preferred stock valuation technique.

69., D1 in the dividend growth model is associated with which of the following words when solving for P0?

A. , Next, expected, future.

B. , Last, just paid, recent.

C. , Just paid, expected, past.

D. , Paid today, recent, current.

70., If the required rate of return used in the dividend growth model is increased, then:

A. , The dividend amount must also increase.

B. , The current value of the stock will decrease.

D. , The supernormal model must be used to value the stock.

E. , The growth rate must also increase.

C. , P0 will increase.

71., Which of the following rights are granted to shareholders of common stock?

I. Election of corporate directors

II. Selection of all senior management executives

III. The option of voting by proxy

IV. The right to share in any remaining assets in a liquidation

A. , I and III only

B. , II and IV only

C. , I, II, and III only D. , I, III, and IV only

72., Which of the following statements concerning dividends is (are) correct?

I. Dividends become a liability of the corporation at the time they are declared.

II. The stockholders determine the amount of dividend to be paid.

III. Dividends are a tax deductible expense.

IV. Common stock dividends can be either cumulative or non-cumulative.

A. , I only

B. , II only

C. , I and IV only

D. , II and IV only

73., If the management of a corporation wants to raise equity capital while maintaining control over the corporation and limiting their cash outflows, they should issue shares of:

A. , Non-voting preferred stock. B. , Voting preferred stock.

C. , Voting common stock.

D. , Non-voting common stock. E. , Zero coupon bonds.

74., Shareholders of convertible preferred stock generally have the:

A. , Right to convert their shares into bonds with an equivalent yield-to-maturity.

B. , Obligation to convert their shares into callable shares of common stock.

C. , Obligation to convert their shares into shares of common stock.

D. , Right to convert their shares into cash at par value at their discretion.

E. , Right to convert their shares into shares of common stock.

75., It is easier for an outsider to gain control over a corporation when:

A. , Voting by proxy is not permitted.

B. , Management controls most of the common shares outstanding.

D. , Preferred shares are not convertible.

E. , Shareholders receive a consistently high rate of return.

76., Which one of the following statements is correct concerning the differences between preferred and common stock?

A. , Common shareholders have first right of priority after creditors in liquidation.

B. , Preferred shares carry voting rights while common shares do not.

C. , Common shareholders generally have more control over a corporation than preferred shareholders.

D. , Common dividends in arrearage must be paid prior to any additional preferred stock dividends.

E. , Common stock is a form of equity while preferred stock is a form of debt from a legal standpoint.

77., There are three seats open on the board of directors of ABC, Inc. Ann owns voting shares of ABC common stock. If ABC uses cumulative voting, the maximum number of

shares that Ann can vote for any one position is equal to:

A. , The number of open seats.

B. , One-third of the number of shares owned.

C. , The number of shares owned.

D. , Three times the number of shares owned multiplied by the number of open seats.

E. , The number of seats open times the number of shares owned.

78., The dividend growth model assumes that:

A. , The rate of growth is constant.

B. , Next year's dividend is the same amount as last year's dividend.

C. , The rate of growth exceeds the required rate of return.

D. , The dividend amount used in the formula is the last dividend paid.

E. , The valuation is as of the year following the payment of the dividend used in the computation.

79., The capital gain yield:

A. , When subtracted from the dividend yield is equal to the required rate of return.

B. , Is the rate at which the price of the stock grows.

C. , Must always be a positive value.

D. , Is equal to the dividend amount divided by the current market price of the stock.

E. , Is the same as the current yield for shares of common stock.

80., Deep Pockets Mining unexpectedly discovered an extremely rich vein of gold. Which of the following types of shareholders will benefit from the increased profits that will

be generated from this find?

I. Preferred shareholders

II. Convertible preferred shareholders

III. Non-voting common shareholders

IV. Common shareholders

A. , IV only

B. , II and IV only

C. , I and II only

D. , I, II, and IV only E. , II, III, and IV only

81., Given constant earnings per share, an increase in dividends will generally:

A. , Increase the dividend yield as well as the capital gains yield. B. , Decrease the growth rate of the corporation and increase the current yield.

C. , Increase the dividend yield and decrease the current yield.

D. , Have no effect on either the capital gains yield or the total return.

E. , Have no effect on either the total return or the current yield.

82., Which of the following statements is (are) correct concerning preferred stock?

I. A missed dividend payment never has to be paid if the preferred stock is cumulative.

II. All preferred stock has an obligatory sinking fund.

III. Preferred stock has a stated liquidation value.

IV. Preferred stock is never callable.

A. , III only

B. , IV only

C. , III and IV only D. , II, III, and IV only

83., What would you pay for a share of ABC Corporation stock today if the next dividend will be $2 per share, your required return on equity investments is 12%, and the stock is

expected to be worth $110 one year from now?

A. , $95 B. , $100 C. , $110 D. , $115 E. , $120

84., The dividend on Simple Motors common stock will be $2 in one year, $3.50 in two years, and $5.00 in three years. You can sell the stock for $75 in three years. If you require

a 10% return on your investment, how much would you be willing to pay for a share of this stock today?

A. , $59.69

B. , $64.65

C. , $64.82

D. , $65.66

E. , $71.30

85., A stock that pays a constant dividend of $2.50 forever currently sells for $21. What is the required rate of return?

A. , 11.0%

B. , 11.5%

C. , 12.0%

D. , 12.5%

E. , 13.0%

F. , Type: Problems

86., Suppose NoGro, Inc. has just issued a dividend of $2.90 per share. Subsequent dividends will remain at $2.90 indefinitely. Returns on the stock of firms like NoGro are

currently running 15%. What is the value of one share of stock?

A. , $2.90

B. , $13.65

C. , $19.33

D. , $31.25

E. , $39.70

87., ABC Company's preferred stock is selling for $25 a share. If the required return is 12%, what will the dividend be two years from now?

A. , $2.39

B. , $2.50

C. , $3.00

D. , $3.30

E. , $3.76

88., The preferred stock of the Pearson Institute pays a constant annual dividend of $3 and sells for $21. You believe the stock will sell for $12 in one year. You must, therefore,

believe that the required return on the stock will be ____ % ___________ in one year.

A. , 8; higher

B. , 8; lower

C. , 9; higher

D. , 10; lower

E. , 10; higher

89., What would you pay today for a stock that is expected to make a $1.50 dividend in one year if the expected dividend growth rate is 3% and you require a 16% return on your

investment?

A. , $11.54

B. , $12.33

C. , $12.43

D. , $13.14

E. , $14.30

90., The stock of MTY Golf World currently sells for $133.75 per share. The firm has a constant dividend growth rate of 7% and just paid a dividend of $6.21. If the required rate

of return is 12%, what will the stock sell for one year from now?

A. , $127.06

B. , $133.75

C. , $143.11

D. , $149.80

E. , $152.78

91., Suppose Pale Hose, Inc. has just paid a dividend of $1.40 per share. Sales and profits for Pale Hose are expected to grow at a rate of 5% per year. Its dividend is expected to

grow by the same amount. If the required return is 10%, what is the value of a share of Pale Hose?

A. , $14.00

B. , $15.25

C. , $25.80

D. , $28.00

E. , $29.40

92., Boomer Products, Inc. manufactures "no-inhale" cigarettes. As its target customers age and pass on, sales of the product are expected to decline. Thus, demographics suggest

that earnings and dividends will decline at a rate of 4% annually forever. The firm just paid a dividend of $2.50; given a required return of 12%, the stock should today should sell

for:

A. , $10.25

B. , $12.50

C. , $15.00

D. , $16.25

E. , $32.50

93., Boomer Products, Inc. manufactures "no-inhale" cigarettes. As its target customers age and pass on, sales of the product are expected to decline. Thus, demographics suggest

that earnings and dividends will decline at a rate of 4% annually forever. The firm just paid a dividend of $2.50; given a required return is 12%, the price of the stock in two years

will be:

A. , $9.45

B. , $11.52

C. , $13.82

D. , $14.98

E. , $29.95

94., Llano's stock is currently selling for $51. The expected dividend one year from now is $1.50 and the required return is 10%. What is this firm's dividend growth rate assuming

the constant dividend growth model is appropriate?

A. , 7%

B. , 8%

C. , 9%

D. , 10%

E. , 11%

95., The current price of XYZ stock is $51. Dividends are expected to grow at 7% indefinitely and the most recent dividend was $1. What is the required rate of return on XYZ

stock?

A. , 9.0% B. , 9.1% C. , 9.3% D. , 10.6% E. , 11.2%

96., ABC Corporation's common stock dividend yield is 2.1%, it just paid a dividend of $1, and is expected to pay a dividend of $1.07 one year from now. Dividends are expected

to grow at a constant rate indefinitely. What is the required rate of return on ABC stock?

A. , 9.0% B. , 9.1% C. , 9.3% D. , 10.6% E. , 11.2%

97., Suppose that you have just purchased a share of stock for $22.51. The most recent dividend was $1.50 and dividends are expected to grow at a rate of 5% indefinitely. What

must your required return be on the stock?

A. , 5.00%

B. , 7.00%

C. , 10.25%

D. , 12.00%

E. , 13.67%

98., Killnum Corp. announces that the dividend for the next year will be $2.50 per share rather than the originally expected $1.50 per share. From then on, it is expected that

dividends will resume their historical constant growth rate of 5% per year. What would you expect to happen to the price of the stock? Ignore any tax effects.

A. , The price will likely double.

B. , The price will likely rise by less than 100%.

C. , The price will likely rise by exactly 50%.

D. , The price will remain unchanged.

E. , The price will likely rise by the present value of $1.

99., McGonigal's Meats, Inc. currently pays no dividends. The firm plans to begin paying dividends in three years. The first dividend will be $1 and dividends are expected to

grow at 5% thereafter. Given a required return of 15%, what would you pay for the stock today?

A. , $7.18

B. , $7.56

C. , $8.29

D. , $10.00

E. , $10.50

100., McIntyre's Moats, Inc. currently pays no dividends, but the firm will begin paying dividends in three years. The first dividend will be $2.50 and dividends are expected to

grow at 2% thereafter. Given a current market price of $55.62, what is the required return on the stock?

A. , 4% B. , 5%

C. , 6% D. , 7% E. , 8%

101., McIver's Meals, Inc. currently pays a $1 annual dividend. Investors believe that dividends will grow at 15% next year, 10% annually for the two years after that, and 5%

annually thereafter. Assume the required return is 10%. What is the current market price of the stock?

A. , $21.77

B. , $22.99

C. , $25.09

D. , $26.13

E. , $27.65

102., Biogenetics, Inc. plans to retain and reinvest all of its earnings for the next 30 years. Beginning in year 31, the firm will begin to pay a $12 per share dividend. The dividend

will not subsequently change. Given a required return of 15%, what should the stock sell for today?

A. , $1.21 B. , $2.15 C. , $8.15 D. , $42.00E. , $80.00

103., Biogenetics, Inc. plans to retain and reinvest all of its earnings for the next 30 years. Beginning in year 31, the firm will begin to pay a $12 per share dividend. The dividend

will increase at a 6% rate annually thereafter. Given a required return of 15%, what the stock should sell for today?

A. , $1.21 B. , $1.64 C. , $2.01 D. , $4.39 E. , $13.45

104., Suppose the Pale Hose Corp. is expected to pay a dividend next year of $1.75 per share. Both sales and profits for Pale Hose are expected to grow at a rate of 15% for the

following two years and then at 2% per year thereafter indefinitely. Dividend growth is expected to match sales growth. If the required return is 14%, what is the value of a share

of Pale Hose?

A. , $16.49

B. , $16.98

C. , $17.92

D. , $18.49

E. , $19.76

105., Energistics, Inc. plans to retain and reinvest all of its earnings for the next three years; at the end of year 3 the firm will pay a special dividend of $5 per share. Beginning in

year 4, the firm will begin to pay a dividend of $1 per share, which is expected to grow at a 3% rate annually forever. Given a required return of 12%, the stock should sell for

_____ today.

A. , $11.47

B. , $12.44

C. , $13.15

D. , $14.27

E. , $15.01

106., Moore Money Inc. just paid a dividend of $1. The required return on the stock is 15%. If it has the following expected dividend growth rates what should the stock sell

for?

A. , $22.45

B. , $26.17

C. , $27.79

D. , $28.89

E. , $29.68

107., Suppose that sales and profits of Oly Enterprises are growing at a rate of 30% per year. At the end of four years the growth rate will drop to a steady 4%. At the end of year

5, Oly will issue its first dividend in the amount of $2 per share. If the required return is 16%, what is the value of a share of stock? Assume dividends grow at the same rate as

earnings after year 4.

A. , $7.49

B. , $7.67

C. , $8.17

D. , 9.20

E. , $9.91

108., Etling Inc.'s dividend is expected to grow at 6% for the next two years and then at 3% forever. If the current dividend is $3 and the required return is 16%, what is the price

of the stock?

A. , $25.10

B. , $25.82

C. , $26.15

D. , $27.58

E. , $29.45

109., CBC stock is expected to sell for $22 two years from now. Supernormal growth of 5% is expected for the next two years. The current dividend is $1 and the required return

is 15%. What constant growth rate is expected beginning in year 3?

A. , 6.5%

B. , 6.7% C. , 8.1% D. , 8.4% E. , 9.5%

110., If Russian Motors closed at $22 and the current quarterly dividend is $1.25, what% yield would be reported in The National Post?

A. , 5.7% B. , 6.5% C. , 9.1% D. , 22.2% E. , 22.7%

111., A firm's stock has a required return of 10%. The stock's dividend yield is 6%. What is the dividend the firm is expected to pay in one year if the current stock price is $40?

A. , $2.00 B. , $2.40 C. , $2.80 D. , $3.20 E. , $3.60

112., A firm's stock has a required return of 10%. The stock's dividend yield is 6%. What dividend did the firm just pay if the current stock price is $40?

A. , $2.18 B. , $2.31 C. , $2.50 D. , $2.87 E. , $3.60

113., Saskatchewan Steel, Ltd. and Alberta Copper, Inc. both recently announced earnings of $400,001. Both companies have common shares outstanding of 250,000 and rates of

return of 10%. Saskatchewan Steel has a new project that will generate net cash flows of $50,000 per year forever. Alberta Copper has a new project that will generate net cash

flows of $40,000 per year forever. The stock price of Saskatchewan Steel should be _______ greater than the stock price of Alberta Steel.

A. , $0.04

B. , $0.40 C. , $3.60 D. , $10,000

E. , $100,000

114., There is an election being held to fill two seats on the board of directors of a firm in which you hold stock. There are a total of 420 shares outstanding. If the election is

conducted under cumulative voting and you own 120 shares, how many more shares must you buy to be assured of earning a seat on the board?

A. , 0

B. , 20

C. , 21

D. , 91

E. , 141

115., Four directors will be elected and you wish to be one of them. With cumulative voting, what percentage of the shares (plus one) do you need to have on your side to

guarantee you a seat?

A. , 12.5%

B. , 16.7%

C. , 20.0%

D. , 25.0%

E. , 33.3%

116., A firm has 200,000 shares outstanding. If three directors will be elected, how many shares do you need to control to assure yourself a seat on the board under cumulative

voting procedures?

A. , 30,001

B. , 40,001

C. , 50,001

D. , 66,668

E. , 100,001

117., Suppose you own 500 shares of Biogen common stock. Two directors are to be elected. Since the firm uses cumulative voting, you can cast as many as _____________

votes for a single director.

A. , 100

B. , 250

C. , 500

D. , 750

E. , 1,000

118., Your firm is converting from cumulative voting to straight voting. You currently own the minimum number of shares needed to assure yourself a seat on the board in any

election under cumulative voting. How many more shares must you purchase in order to assure yourself a seat under straight voting? Assume there are a total of 500,000 shares

outstanding and that three directors go up for election at a time.

A. , 0

B. , 25,000

C. , 125,000

D. , 250,000

E. , 250,001

,

119., Big Hat must have closed at _________ per share on the previous trading day.

A. , $97.38

B. , $98.26

C. , $99.88

D. , $98.13

E. , $98.50

120., For the current year, the expected dividend per share is:

A. , $1.10 B. , $1.30 C. , $1.32 D. , $2.10 E. , $4.40

121., Assume the expected growth rate in dividends is 7%. Then the constant growth model suggests that the required return on Big Hat stock is:

A. , 7.4% B. , 7.9% C. , 8.0% D. , 8.4% E. , 9.8%

122., Based on the quote, a good estimate of EPS over the last four quarters is:

A. , $0.16

B. , $3.29

C. , $6.13

D. , $8.45

123., On this trading day, the number of Big Hat shares that changed hands was:

A. , 209 B. , 2,092 C. , 20,925D. , 209,250

E. , 2,092,500

E. , $9.76

,

124., Assume that Big Hat paid a $1.12 annual dividend in the previous period. What is the dividend growth rate based on this quote?

A. , 1.16%

B. , 12.20%

C. , 14.15%

D. , 16.07%

E. , 16.29%

125., You believe that the required return on Big Hat stock is 12% and that the expected dividend growth rate is 10%, which is expected to remain constant for the foreseeable

future. Is the stock currently overvalued, undervalued, or fairly priced?

A. , Overvalued

B. , Undervalued

C. , Fairly priced

D. , Cannot tell without more information

126., Assume that Big Hat is selling at its equilibrium price. Also assume that dividends are expected to grow at a constant rate of 25% for the foreseeable future. What is the

required return on the stock?

A. , 18.5% B. , 22.7% C. , 24.1% D. , 24.7% E. , 26.7%

Bradley Broadcasting expects to pay dividends of $1.10, $1.21, and $1.331 in one, two, and three years, respectively. After that, dividends are expected to grow at a constant rate

of 4% forever. Stocks of similar risk yield 10%.

127., The price of Bradley Broadcasting stock today should be:

A. , $18.48

B. , $19.12

C. , $20.33

D. , $21.46

128., What is growth rate of the Bradley Broadcasting dividend during year 2?

A. , 10% B. , 15% C. , 20% D. , 25% E. , 50%

129., How much is Bradley's stock price expected to increase during the first year?

A. , 1.05%

B. , 4.59%

C. , 5.15%

D. , 6.24%

E. , $22.56

E. , 6.51%

130., What is expected capital gains yield on Bradley Broadcasting stock during year 8?

A. , 3% B. , 4%

C. , 9%

D. , 10% E. , 14%

131., The Johnson Company just paid an annual dividend of $1.60. How much would you be willing to pay for one share of Johnson Company stock if the dividend remains

constant and you require a 9% rate of return?

A. , $14.40

B. , $16.33

C. , $17.78

D. , $18.21

E. , $19.38

132., Alhandro, Inc. just paid an annual dividend of $1.03. It has been increasing its dividends by 4% annually and is expected to continue doing so. How much can it expect to

receive for each new share of stock offered if investors require an 11% rate of return?

A. , $9.36 B. , $9.74 C. , $14.71

D. , $15.30

E. , $15.91

133., The KLS Co. is expected to pay the following annual dividends for the next three years: $1.00, $1.50, and $1.60, respectively. After that time, it is expected to increase its

dividends by 3% annually. Stocks similar to KLS are yielding 9.5%. What is one share of KLS worth today?

A. , $22.69

B. , $23.87

C. , $27.05

D. , $27.30

E. , $29.20

134., The Brown Company just announced that it will be increasing its annual dividend to $1.68 next year and that future dividends will be increased by 2.5% annually. How

much would you be willing to pay for one share of the Brown Company stock if you require a 12% rate of return?

A. , $14.35

B. , $14.63

C. , $17.68

D. , $18.13

E. , $19.81

135., The MIKO Corp. paid $0.84 in dividends last year. It has just announced that it expects to increase its dividends by 2% each year for the foreseeable future. Currently,

MIKO stock is priced at $21.32 per share. What is the rate of return on MIKO stock?

A. , 4.01%

B. , 4.96%

C. , 5.86%

D. , 5.94%

E. , 6.02%

136., Swanson Brothers expects to pay a $2.20 dividend next year which is an increase of 3.25% over the prior year. After next year, dividends are projected to grow at a steady

rate of 2.5%. Shares of Swanson stock are currently selling at $15.80 per share. What is the rate of return on Swanson stock?

A. , 14.27%

B. , 16.42%

C. , 16.77%

D. , 17.17%

E. , 23.66%

137., Shares of Blue Dye, Inc. are currently priced at $23.64 a share and produce a total return of 14.80%. The annual dividends of Blue Dye have been increasing at a rate of

2.4% and are expected to continue at this rate. What is the expected amount of the next dividend?

A. , $1.37 B. , $1.91 C. , $2.41 D. , $2.87 E. , $2.93

138., Morris, Inc. has some 8% preferred stock outstanding. The par value of the preferred stock is $100. How much are you willing to pay for one share of Morris preferred stock

if you require a 7% rate of return?

A. , $87.50

B. , $98.11

C. , $114.29

D. , $123.87

E. , $125.14

139., Noshima Industries issued dividends totaling $0.60 last year. For the next two years, it expects dividends to increase by 50% annually and then remain constant thereafter.

How much is one share of Noshima Industries stock worth today if you require a 9% rate of return?

A. , $13.45

B. , $13.77

C. , $14.59

D. , $15.00

E. , $15.14

140., MDK, Inc. is a high growth firm that has never paid a dividend. The company just issued a press release stating that next year it plans on paying an annual dividend of

$0.34. It also stated that dividends are expected to increase by 40% a year for each of the following four years and then increase by 4% annually thereafter. The required rate of

return on this stock is 15%. What is the expected price per share of MDK stock six years from now?

A. , $9.12

B. , $9.42

C. , $12.35

D. , $12.84

E. , $14.14

141., Mahenterin Inc. is expecting to pay $1.23, $0.99, and $1.13 in annual dividends for the next three years respectively. After that, it projects that dividends will increase by

1.5% annually. Andy is in the 25% marginal tax bracket and wants to earn 6% after-tax on his investments. How much is Andy willing to pay today for one share of Mahenterin

Inc. stock?

A. , $16.90

B. , $17.04

C. , $17.31

D. , $17.36

E. , $17.81

142., Michael's Inc. 9% preferred stock is currently priced at $124.30. If Michael's wishes to sell some new preferred stock at par, what rate should it assign to the new shares?

A. , 6.76%

B. , 7.24%

C. , 8.05%

D. , 9.00%

E. , 11.19%

143., Jamie just paid $8,239 for 100 shares of 6% preferred stock. What rate of return will she earn?

A. , 4.94%

B. , 7.28%

C. , 8.24%

D. , 10.94%

E. , 713.73%

144., The daily newspaper lists this information on a stock: Last $36.19, Net Chg -1.63 and Yld% 1.3. What is the amount of the current dividend?

A. , $0.44 B. , $0.45 C. , $0.47 D. , $0.49 E. , $0.52

145., ABC, Inc. has earnings per share of $1.44. The newspaper shows a P/E of 23 and a dividend of $1.39 for shares of ABC, Inc. stock. What is the dividend yield?

A. , 3.6% B. , 3.8% C. , 3.9% D. , 4.2% E. , 4.3%

146., Leon purchased 1,000 shares of LJK stock this morning at a price of $45.67 a share. The stock paid a dividend last year of $1.80 per share. Leon's required rate of return is

13% on this type of investment. What is the capital gains yield on LJK stock?

A. , 7.41%

B. , 8.72%

C. , 9.06%

D. , 13.85%

E. , 16.94%

147., ABC stock closed yesterday at a price of $39.80 a share. The price today was down $2.10. ABC pays a $0.48 annual dividend which has remained constant for five years.

What is the current dividend yield today?

A. , 1.15%

B. , 1.21%

C. , 1.27%

D. , 1.31%

E. , 1.33%

148., An 8% preferred stock closed yesterday at a price of $91.32. The stock closed today at par. What is the current dividend yield?

A. , 7.31%

B. , 7.50%

C. , 8.00%

D. , 8.76%

E. , 8.80%

149., Marcy owns 100 shares of Dee's Inc. while Teri owns 300 shares and Lucie owns 500 shares. There are 900 shares outstanding. There are currently three seats open on the

board of directors. With straight voting, how many additional shares will Marcy have to buy from Terri or Lucie to guarantee that she will be elected to the board?

A. , 0

B. , 1

C. , 151 D. , 201 E. , 351

150., There are 5 seats open on the board of directors of Alpha, Inc. Jason wants to be positive that he can be elected to one of these positions. Alpha uses straight voting. There

are 1,500 shares of Alpha stock outstanding. Twenty% of the shares are owned by Midge, 30% are owned by Peter, 10% are owned by Jeff, 25% are owned by Jason and the rest

are owned by Edward. How many additional shares of stock must Jason buy to ensure that he wins a seat?

A. , 0

B. , 251 C. , 298 D. , 376 E. , 411

151., Marcy owns 100 shares of Dee's Inc. while Teri owns 300 shares and Lucie owns 500 shares. There are 900 shares outstanding. There are currently three seats open on the

board of directors. With cumulative voting, how many additional shares will Marcy have to buy from Teri or Lucie to guarantee that she will be elected to the board?

A. , 0

B. , 63

C. , 126 D. , 256 E. , 351

152., There are 5 seats open on the board of directors of Alpha, Inc. Jason wants to be positive that he can be elected to one of these positions. Alpha uses cumulative voting.

There are 1,500 shares of Alpha stock outstanding. Twenty% of the shares are owned by Midge, 30% are owned by Peter, 10% are owned by Jeff, 25% are owned by Jason and

the rest are owned by Edward. How many additional shares of stock must Jason buy to ensure that he wins a seat?

A. , 0

B. , 56

C. , 116 D. , 251 E. , 376

153., Jackson Supply has 2,500 shares of stock outstanding. There are three positions open on the board of directors. Amy wants to be elected to one of those positions. How

many more shares must Amy own to guarantee her election if Jackson Supply uses straight voting as opposed to cumulative voting? A. , 625

B. , 626 C. , 834 D. , 1250

154., The Battery Co. paid $1.20 in dividends last year. Margaret paid a price of $15.00 a share for Battery Co. stock and has an expected return of 8% on this investment. What is

the growth rate of the Battery Co. stock?

A. , 0% B. , 4%

C. , 8%

D. , 12% E. , 16%

155., An asset characterized by cash flows that increase at a constant rate forever is called a:

D. , perpetuity due. E. , preferred stock.

156., The stock valuation model that determines the current stock price by dividing the next annual dividend amount by the excess of the discount rate less the dividend growth

rate is called the _____ model. A. , zero growth

B. , dividend growth C. , capital pricing

D. , earnings capitalization

E. , discounted dividend

157., Next year's annual dividend divided by the current stock price is called the:

A. , yield to maturity.

B. , total yield.

C. , dividend yield. D. , capital gains yield.

E. , earnings yield.

158., The rate at which a stock's price is expected to appreciate (or depreciate) is called the _____ yield.

A. , current

B. , total C. , dividend

D. , capital gains

E. , earnings

159., A form of equity which receives preferential treatment in the payment of dividends is called _____ stock.

A. , dual class

B. , cumulative

C. , deferred

D. , preferred

E. , common

160., A _____ is a form of equity security that has a stated liquidating value. A. , bond B. , debenture

E. , preferred stock

161., A form of equity which receives no preferential treatment in either the payment of dividends or in bankruptcy distributions is called _____ stock.

A. , dual class

B. , cumulative

C. , deferred

D. , preferred

E. , common

162., The voting procedure where you must own 50% plus one of the outstanding shares of stock to guarantee that you will win a seat on the board of directors is called _____

voting.

A. , democratic

B. , cumulative

C. , straight

D. , deferred

E. , proxy

163., The James River Co. pays an annual dividend of $1.50 per share on its common stock. This dividend amount has been constant for the past 15 years and is expected to

remain constant. Given this, one share of James River Co. stock:

A. , is basically worthless as it offers no growth potential.

B. , has a market value equal to the present value of $1.50 paid one year from today.

C. , is valued as if the dividend paid is a perpetuity.

D. , is valued with an assumed growth rate of 3%.

E. , has a market value of $15.00.

164., The common stock of the Kenwith Co. pays a constant annual dividend. Thus, the market price of Kenwith stock will:

A. , also remain constant.

B. , increase over time.

C. , decrease over time.

D. , increase when the market rate of return increases.

E. , decrease when the market rate of return increases.

165., The Koster Co. currently pays an annual dividend of $1.00 and plans on increasing that amount by 5% each year. The Keyser Co. currently pays an annual dividend of $1.00

and plans on increasing its dividend by 3% annually. Given this, it can be stated with certainty that the _____ of the Koster Co. stock is greater than the _____ of the Keyser Co.

stock.

A. , market price; market price B. , dividend yield; dividend yield

C. , rate of capital gain; rate of capital gain

D. , total return; total return

E. , capital gains; dividend yield

I. assumes that dividends increase at a constant rate forever.

II. can be used to compute a stock price at any point of time.

III. states that the market price of a stock is only affected by the amount of the dividend.

IV. considers capital gains but ignores the dividend yield.

A. , I only

B. , II only

C. , III and IV only D. , I and II only

E. , I, II, and III only

167., The underlying assumption of the dividend growth model is that a stock is worth:

A. , the same amount to every investor regardless of their desired rate of return.

B. , the present value of the future income which the stock generates.

C. , an amount computed as the next annual dividend divided by the market rate of return.

D. , the same amount as any other stock that pays the same current dividend and has the same required rate of return.

E. , an amount computed as the next annual dividend divided by the required rate of return.

168., Assume that you are using the dividend growth model to value stocks. If you expect the market rate of return to increase across the board on all equity securities, then you

should also expect the:

A. , market values of all stocks to increase, all else constant.

B. , market values of all stocks to remain constant as the dividend growth will offset the increase in the market rate.

C. , market values of all stocks to decrease, all else constant.

D. , stocks that do not pay dividends to decrease in price while the dividend-paying stocks maintain a constant price.

E. , dividend growth rates to increase to offset this change.

169., Latcher's Inc. is a relatively new firm that is still in a period of rapid development. The company plans on retaining all of its earnings for the next six years. Seven years

from now, the company projects paying an annual dividend of $.25 a share and then increasing that amount by 3% annually thereafter. To value this stock as of today, you would

most likely determine the value of the stock _____ years from today before determining today's value.

A. , 4

B. , 5

C. , 6

D. , 7

E. , 8

170., The Robert Phillips Co. currently pays no dividend. The company is anticipating dividends of $0, $0, $0, $.10, $.20, and $.30 over the next 6 years, respectively. After that,

the company anticipates increasing the dividend by 4% annually. The first step in computing the value of this stock today, is to compute the value of the stock in year:

A. , 3.

B. , 4.

C. , 5.

D. , 6.

E. , 7.

171., Supernormal growth refers to a firm that increases its dividend by:

A. , three or more% per year.

B. , a rate which is most likely not sustainable over an extended period of time.

C. , a constant rate of 2 or more% per year. D. , $.10 or more per year.

E. , an amount in excess of $.10 a year.

172., The total rate of return earned on a stock is comprised of which two of the following?

I. current yield

II. yield to maturity

III. dividend yield

IV. capital gains yield

A. , I and II only

B. , I and IV only

C. , II and III only

D. , II and IV only

E. , III and IV only

173., The total rate of return on a stock can be positive even when the price of the stock depreciates because of the:

A. , capital appreciation.

B. , interest yield.

C. , dividend yield. D. , supernormal growth.

E. , real rate of return.

174., Fred Flintlock wants to earn a total of 10% on his investments. He recently purchased shares of ABC stock at a price of $20 a share. The stock pays a $1 a year dividend.

The price of ABC stock needs to _____ if Fred is to achieve his 10% rate of return.

A. , remain constant B. , decrease by 5% C. , increase by 5% D. , increase by 10% E. , increase by 15%

175., Which one of the following correctly defines the dividend growth model?

A. , P0 = D0

(R - g)

B. , D = P0 (R - g)

I. elect the corporate directors.

II. select the senior management of the firm.

III. elect the chief executive officer (CEO).

IV. elect the chief operating officer (COO).

A. , I only

B. , I and III only

C. , II only

C. , R = (P0

D0) + g

D. , I and II only

D. , R = (D1

P0) + g

E. , P0 = (D1

R) + g

177., Jack owns 35 shares of stock in Beta, Inc. and wants to exercise as much control as possible over the company. Beta, Inc. has a total of 100 shares of stock outstanding. Each

share receives one vote. Presently, the company is voting to elect two new directors. Which one of the following statements must be true given this information?

A. , If straight voting applies, Jack is assured one seat on the board.

B. , If straight voting applies, Jack can control both open seats.

C. , If cumulative voting applies, Jack is assured one seat on the board. D. , If cumulative voting applies, Jack can control both open seats.

E. , Regardless of the type of voting employed, Jack does not own enough shares to control any of the seats.

178., ABC Co. is owned by a group of shareholders, all of whom vote independently and all of whom want personal control over the firm. If straight voting is used, a

shareholder:

A. , must 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 open positions and the shareholder owns at least 25% plus one of the outstanding shares.

C. , must own at least two-thirds of the shares, plus one, to exercise control over the elections.

D. , is only permitted to elect one director, regardless of the number of shares owned.

E. , who owns more shares than anyone else, regardless of the number of shares owned, will control the elections.

179., The Zilo Corp. has 1,000 shareholders and is preparing to elect three new board members. You do not own enough shares to control the elections but are determined to oust

the current leadership. The most likely result of this situation is a:

A. , negotiated settlement where you are granted control over one of the three open positions.

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 open positions.

D. , total loss of power for you since you are a minority shareholder.

E. , proxy fight for control of the firm.

180., Common stock shareholders are generally granted rights which include the right to:

I. share in company profits.

II. vote for company directors.

III. vote on proposed mergers.

IV. residual assets in a liquidation.

A. , I and II only

B. , II and III only

C. , I and IV only

D. , I, II, and IV only

181., The Scott Co. has a general dividend policy whereby it pays a constant annual dividend of $1 per share of common stock. The firm has 1,000 shares of stock outstanding.

The company:

A. , must always show a current liability of $1,000 for dividends payable.

B. , is obligated to continue paying $1 per share per year.

C. , will be declared in default and can face bankruptcy if it does not pay $1 per year to each shareholder on a timely basis.

D. , has a liability which must be paid at a later date should the company miss paying an annual dividend payment.

E. , must still declare each dividend before it becomes an actual company liability.

182., The dividends paid by a corporation:

I. to an individual becomes taxable income of that individual.

II. reduce the taxable income of the corporation.

III. are declared by the chief financial officer of the corporation.

IV. to another corporation may or may not represent taxable income to the recipient.

A. , I only

B. , I and IV only

C. , II and III only

D. , I, II, and IV only

A. , is entitled to a distribution of income prior to the common shareholders.

B. , has the right to veto the outcome of an election held by the common shareholders.

C. , has the right to declare the company bankrupt whenever there are insufficient funds to pay dividends to the common shareholders.

D. , receives tax-free dividends if it is an individual and own more than 20% of the outstanding preferred shares.

E. , has the right to collect payment on any unpaid dividends as long as the stock is noncumulative preferred.

184., A 6% preferred stock pays _____ a year in dividends per share. The par value of the preferred stock is $100.

A. , $3

B. , $6

C. , $12

D. , $30

E. , $60

185., Which one of the following statements concerning preferred stock is correct?

A. , Unpaid preferred dividends are a liability of the firm.

B. , Preferred dividends must be paid quarterly provided the firm has net income that exceeds the amount of the quarterly dividend.

C. , Preferred dividends must be paid timely each quarter or the unpaid dividends start accruing interest.

D. , All unpaid dividends on preferred stock, regardless of the type of preferred, must be paid before any income can be distributed to common shareholders.

E. , Preferred shareholders may be granted voting rights and seats on the board if preferred dividend payments remain unpaid.

186., In a liquidation, each share of 5% preferred stock is generally entitled to a liquidation payment of _____ as long as there are sufficient funds available. The par value of the

preferred stock is $100.

A. , $1

B. , $5

C. , $10 D. , $50 E. , $100

187., The closing price of a stock is quoted at 22.87, with a P/E of 26 and a net change of 1.42. Based on this information, which one of the following statements is correct?

A. , The closing price on the previous day was $1.42 higher than today's closing price. B. , A dealer will buy the stock at $22.87 and sell it at $26 a share.

C. , The stock increased in value between yesterday's close and today's close by $.0142. D. , The earnings per share are equal to 1/26th of $22.87.

E. , The earnings per share have increased by $1.42 this year.

188., A stock listing contains the following information: P/E 17.5, closing price 33.10, dividend .80, YTD% chg 3.4, and a net chg of -.50. Which of the following statements are

correct given this information?

I. The stock price has increased by 3.4% during the current year.

II. The closing price on the previous trading day was $32.60.

III. The earnings per share are approximately $1.89.

IV. The current yield is 17.5%.

A. , I and II only

B. , I and III only

C. , II and III only

D. , III and IV only E. , I, III, and IV only

189., Angelina's made two announcements concerning its common stock today. First, the company announced that its next annual dividend has been set at $2.16 a share.

Secondly, the company announced that all future dividends will increase by 4% annually. What is the maximum amount you should pay to purchase a share of Angelina's stock if

your goal is to earn a 10% rate of return?

A. , $21.60

B. , $22.46

C. , $27.44

D. , $34.62

E. , $36.00

190., How much are you willing to pay for one share of stock if the company just paid a $.80 annual dividend, the dividends increase by 4% annually and you require an 8% rate

of return?

A. , $19.23

B. , $20.00

C. , $20.40

D. , $20.80

E. , $21.63

191., Lee Hong Imports paid a $1.00 per share annual dividend last week. Dividends are expected to increase by 5% annually. What is one share of this stock worth to you today

if the appropriate discount rate is 14%?

A. , $7.14

B. , $7.50

C. , $11.11

D. , $11.67

E. , $12.25

192., Majestic Homes stock traditionally provides an 8% rate of return. The company just paid a $2 a year dividend, which is expected to increase by 5% per year. If you are

planning on buying 1,000 shares of this stock next year, how much should you expect to pay per share if the market rate of return for this type of security is 9% at the time of your

purchase?

A. , $48.60

B. , $52.50

C. , $55.13

D. , $57.89

E. , $70.00

193., Martin's Yachts has paid annual dividends of $1.40, $1.75, and $2.00 a share over the past three years, respectively. The company now predicts that it will maintain a

constant dividend since its business has leveled off and sales are expected to remain relatively constant. Given the lack of future growth, you will only buy this stock if you can

earn at least a 15% rate of return. What is the maximum amount you are willing to pay to buy one share of this stock today?

A. , $10.00

B. , $13.33

C. , $16.67

D. , $18.88

E. , $20.00

194., The current yield on Alpha's common stock is 4.8%. The company just paid a $2.10 dividend. The rumour is that the dividend will be $2.205 next year. The dividend growth

rate is expected to remain constant at the current level. What is the required rate of return on Alpha's stock?

A. , 10.04%

B. , 16.07%

C. , 21.88%

D. , 43.75%

E. , 45.94%

195., Mathilda's Vineyard recently paid a $3.60 annual dividend on its common stock. This dividend increases at an average rate of 3.5% per year. The stock is currently selling

for $62.10 a share. What is the market rate of return? A. , 2.5%

B. , 3.5%

C. , 5.5%

D. , 6.0%

E. , 9.5%

196., Bet'R Bilt Bikes just announced that its annual dividend for this coming year will be $2.42 a share and that all future dividends are expected to increase by 2.5% annually.

What is the market rate of return if this stock is currently selling for $22 a share?

A. , 9.5% B. , 11.0% C. , 12.5%

D. , 13.5%

E. , 15.0%

197., The common stock of Grady Co. returned an 11.25% rate of return last year. The dividend amount was $.70 a share which equated to a dividend yield of 1.5%. What was the

rate of price appreciation on the stock?

A. , 1.50%

B. , 8.00%

C. , 9.75%

D. , 11.25%

E. , 12.75%

198., The common stock of Energizer's pays an annual dividend that is expected to increase by 10% annually. The stock commands a market rate of return of 12% and sells for

$60.50 a share. What is the expected amount of the next dividend to be paid on Energizer's common stock?

A. , $.90 B. , $1.00 C. , $1.10

D. , $1.21

E. , $1.33

199., The Reading Co. has adopted a policy of increasing the annual dividend on its common stock at a constant rate of 3% annually. The last dividend it paid was $0.90 a share.

What will its dividend be in six years?

A. , $.90

B. , $.93

C. , $1.04

D. , $1.07

E. , $1.11

200., A stock pays a constant annual dividend and sells for $31.11 a share. If the rate of return on this stock is 9%, what is the dividend amount?

A. , $1.40 B. , $1.80 C. , $2.20 D. , $2.40

E. , $2.80

201., You have decided that you would like to own some shares of GH Corp. but need an expected 12% rate of return to compensate for the perceived risk of such ownership.

What is the maximum you are willing to spend per share to buy GH stock if the company pays a constant $3.50 annual dividend per share?

A. , $26.04

B. , $29.17

C. , $32.67

D. , $34.29

E. , $36.59

202., Turnips and Parsley common stock sells for $39.86 a share at a market rate of return of 9.5%. The company just paid its annual dividend of $1.20. What is the rate of growth

of its dividend?

A. , 5.2% B. , 5.5% C. , 5.9% D. , 6.0% E. , 6.3%

203., Wilbert's Clothing Stores just paid a $1.20 annual dividend. The company has a policy whereby the dividend increases by 2.5% annually. You would like to purchase 100

shares of stock in this firm but realize that you will not have the funds to do so for another three years. If you desire a 10% rate of return, how much should you expect to pay for

100 shares when you can afford to buy this stock? Ignore trading costs.

A. , $1,640

B. , $1,681

C. , $1,723

D. , $1,766

E. , $1,810

204., The Merriweather Co. just announced that it is increasing its annual dividend to $1.60 and establishing a policy whereby the dividend will increase by 3.5% annually

thereafter. How much will one share of this stock be worth five years from now if the required rate of return is 12%?

A. , $21.60

B. , $22.36

C. , $23.14

D. , $23.95

E. , $24.79

205., Shares of the Katydid Co. common stock are currently selling for $27.73. The last dividend paid was $1.60 per share. The market rate of return is 10%. At what rate is the

dividend growing? A. , 2.50%

B. , 4.00%

C. , 5.98%

D. , 13.05%

E. , 14.91%

206., The Extreme Reaches Corp. last paid a $1.50 per share annual dividend. The company is planning on paying $3.00, $5.00, $7.50, and $10.00 a share over the next four

years, respectively. After that the dividend will be a constant $2.50 per share per year. What is the market price of this stock if the market rate of return is 15%?

A. , $17.04

B. , $22.39

C. , $26.57

D. , $29.08

E. , $33.71

207., Can't Hold Me Back, Inc. is preparing to pay its first dividends. It is going to pay $1.00, $2.50, and $5.00 a share over the next three years, respectively. After that, the

company has stated that the annual dividend will be $1.25 per share indefinitely. What is this stock worth to you per share if you demand a 7% rate of return?

A. , $7.20

B. , $14.48

C. , $18.88

D. , $21.78

E. , $25.06

208., Now or Later, Inc. recently paid $1.10 as an annual dividend. Future dividends are projected at $1.14, $1.18, $1.22, and $1.25 over the next four years, respectively.

Beginning five years from now, the dividend is expected to increase by 2% annually. What is one share of this stock worth to you if you require an 8% rate of return on similar

investments?

A. , $15.62

B. , $19.57

C. , $21.21

D. , $23.33

E. , $25.98

209., Bill Bailey and Sons pays no dividend at the present time. The company plans to start paying an annual dividend in the amount of $.30 a share for two years commencing

two years from today. After that time, the company plans on paying a constant $1 a share dividend indefinitely. How much are you willing to pay to buy a share of this stock if

your required return is 14%?

A. , $4.82

B. , $5.25

C. , $5.39

D. , $5.46

E. , $5.58

210., The Lighthouse Co. is in a downsizing mode. The company paid a $2.50 annual dividend last year. The company has announced plans to lower the dividend by $.50 a year.

Once the dividend amount becomes zero, the company will cease all dividends permanently. You place a required rate of return of 16% on this particular stock given the

company's situation. What is one share of this stock worth to you today?

A. , $3.76

B. , $4.08

C. , $4.87

D. , $5.13

E. , $5.39

211., Mother and Daughter Enterprises is a relatively new firm that appears to be on the road to great success. The company paid its first annual dividend yesterday in the amount

of $.28 a share. The company plans to double each annual dividend payment for the next three years. After that time, it is planning on paying a constant $1.50 per share

indefinitely. What is one share of this stock worth today if the market rate of return on similar securities is 11.5%?

A. , $9.41

B. , $11.40

C. , $11.46

D. , $11.93

E. , $12.43

212., BC 'n D just paid its annual dividend of $.60 a share. The projected dividends for the next five years are $.30, $.50, $.75, $1.00, and $1.20, respectively. After that time, the

dividends will be held constant at $1.40. What is this stock worth today at a 6% discount rate?

A. , $20.48

B. , $20.60

C. , $21.02

D. , $21.28

E. , $21.43

213., Beaksley, Inc. is a very cyclical type of business which is reflected in its dividend policy. The firm pays a $2.00 a share dividend every other year. The last dividend was

paid last year. Five years from now, the company is repurchasing all of the outstanding shares at a price of $50 a share. At an 8% rate of return, what is this stock worth today?

A. , $34.03

B. , $37.21

C. , $43.78

D. , $48.09

E. , $53.18

214., Nu-Tek, Inc. is expecting a period of intense growth, so it has decided to retain more of its earnings to help finance that growth. As a result it is going to reduce its annual

dividend by 10% a year for the next three years. After that it will maintain a constant dividend of $.70 a share. Last year, the company paid $1.80 per share. What is the market

value of this stock if the required rate of return is 13%?

A. , $6.79

B. , $7.22

C. , $8.22

D. , $8.87

E. , $9.01

215., The Double Dip Co. is expecting its ice cream sales to decline due to the increased interest in healthy eating. Thus, the company has announced that it will be reducing its

annual dividend by 5% a year for the next two years. After that, it will maintain a constant dividend of $1 a share. Last year, the company paid $1.40 per share. What is this stock

worth to you if you require a 9% rate of return?

A. , $10.86

B. , $11.11

C. , $11.64

D. , $12.98

E. , $14.23

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