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not have any affect on foreign companies. c. reduce corporate revenues. d. protect investors from corporate abuses. e. decrease audit costs for U.S. firms. Answer: d Difficulty level: Easy Topic: SARBANES-OXLEY 8. Which one of the following statements concerning a sole proprietorship is correct? a. A sole proprietorship is the least common form of business ownership. b. The profits of a sole proprietorship are taxed twice. c. The owners of a sole proprietorship share profits as established by the partnership agreement. d. The owner of a sole proprietorship may be forced to sell his/her personal assets to pay company debts. e. A sole proprietorship is often structured as a limited liability company. Answer: d Difficulty level: Easy Topic: SOLE PROPRIETORSHIP 9. A general partner: a. has less legal liability than a limited partner. b. has more management responsibility than a limited partner. c. faces double taxation whereas a limited partner does not. d. cannot lose more than the amount of his/her equity investment. e. is the term applied only to corporations which invest in partnerships. Answer: b Difficulty level: Easy Topic: PARTNERSHIP 10. Which one of the following statements is correct concerning corporations? a. The largest firms are usually corporations. b. The majority of firms are corporations. c. The stockholders are usually the managers of a corporation,. d. The ability of a corporation to raise capital is quite limited. e. The income of a corporation is taxed as personal income of the stockholders. Answer: a Difficulty level: Easy Topic: CORPORATION 11. Which one of the following business types is best suited to raising large amounts of capital? a. sole proprietorship b. limited liability company c. corporation d. general partnership e. limited partnership Answer: c Difficulty level: Easy Topic: CORPORATION

12. Which type of business organization has all the respective rights and privileges of a legal person? a. sole proprietorship b. general partnership c. limited partnership d. corporation e. limited liability company Answer: d Difficulty level: Easy Topic: CORPORATION Topic: GOAL OF FINANCIAL MANAGEMENT 13 Which form of business structure faces the greatest agency problems? a. sole proprietorship b. general partnership c. limited partnership d. corporation e. limited liability company Answer: d Difficulty level: Medium Topic: AGENCY PROBLEM 14. Which of the following statements concerning auction markets is (are) correct? I. NASDAQ is an auction market. II. The NYSE is an auction market. III. All trades involve a dealer in an auction market. IV. An auction market is called an over-the-counter market. a. I only b. II only c. I and III only d. II and III only e. II and IV only Answer: b Difficulty level: Medium Topic: AUCTION MARKET 15. Sole proprietorships are predominantly started because: a. they are easily and cheaply setup. b. the proprietorship life is limited to the business owner's life. c. all business taxes are paid as individual taxes. d. All of these. e. None of these. Answer: d Difficulty level: Easy Topic: SOLE PROPRIETORSHIPS 18. Which one of the following statements is correct? a. Both partnerships and corporations incur double taxation. b. Sole proprietorships and partnerships are taxed in a similar fashion. c. Partnerships are the most complicated type of business to form. d. Both partnerships and corporations have bylaws.

the firm acquires more shortterm debt than it does short-term assets. 39. 25.000) + . d. Managers are encouraged to act in the shareholders’ best interests by: a.e.585. negative.34($25.000) + . A firm starts its year with a positive net working capital. c.88% c. the beginning current assets were less than the beginning current liabilities.00% Answer: c Feedback: Tax = .2576 = 25. Both A and B. 21. 34. b. During the year. An increase in which one of the following will cause the operating cash flow to increase? a.500? a.585 ÷ $126.000) + . compensation contracts that tie compensation to corporate success. All types of business formations have limited lives.38% b. Answer: e 11. net working capital d. costs Answer: a 6. or equal to zero.$100. change in net working capital c. the threat of a takeover by another firm. the ending net working capital can be positive. what is the average tax rate for a firm with taxable income of $126. e. c. election of a board of directors who select management. d.76 percent . Answer: b Difficulty level: Medium Topic: BUSINESS TYPES 20. 23. Answer: e Difficulty level: Medium Topic: GOVERNANCE Scrambling: Locked Chapter 2 5. depreciation b.64% e.000) = $32. both accounts receivable and inventory decreased during the year. taxes e. This means that: a.500 .39($126. accounts payable increased and inventory decreased during the year.500 = .25($25. Average tax rate = $32.76% d. e. All of these. the ending net working capital will be negative. b.15($50. Given the tax rates as shown.

The firm spent $180 on fixed assets and increased net working capital by $38. $1.$2.$104 = -$104 Reference: 02_65 14.235 b. $28 d.225 . $142 Answer: a Feedback: Cash flow of the firm = $218 . Thompson’s Jet Skis has operating cash flow of $218. Depreciation is $45 and interest paid is $35.(-$69) = $104.$38 .570) .13.$2. A net total of $69 was paid on long-term debt.405 e. Refer to the figure above.335 Difficulty level: Medium .820) = $1. What is the change in the net working capital from 2007 to 2008? a. What is the amount of the cash flow to stockholders? a. $1.035 c.$180 = $0.($6.335 d. $4. Cash flow to creditors = Feedback: $35 .740 Answer: c Feedback: Change in net working capital = ($7. $3. $114 e. $1.310 . -$28 c. -$104 b. Cash flow to stockholders = $0 .

370 .820) = $1. Refer to the figure above. $845 d.335. $1.960 + $1.335 . What is the cash flow of the firm for 2008? a. -$225 b.845.340 d. $485 c. What is the amount of the non-cash expenses for 2008? a.$1.930 c.080 = $430 Refer To: 02_65 18.$455 = $2. $630 c.215 d.845 . $2.670 . $0 d.100 . $3. $570 b. Refer to the figure above. Refer to the figure above.100 Answer: a Feedback: Operating cash flow = $1.$2.875 = $225 Refer To: 02_65 Reference: 02_84 .370 . What is the operating cash flow for 2008? a.225 .570) .$1. $3. 16. $845 b. Cash flow of the firm = $2.060 Answer: d Feedback: Operating cash flow = $1.370 e.15. Net capital spending = $10. Change in net working capital = ($7. $25 e.($6.370.$2. $2. What is the amount of net new borrowing for 2008? a.930 + $1.370 = $1.845 e.$455 = $2.845 Refer To: 02_65 17. $430 b. $1.930 + $1. $1. $2.590 e.000 Answer: d Feedback: The non-cash expense is depreciation in the amount of $1. -$25 c. $2.$7. Refer to the figure above.310 . $225 Answer: e Feedback: Net new borrowing = $8.080.$10.

71 . Joe’s will have a lower profit margin.55 Answer: d Feedback: Earnings before interest and taxes = $685. Moe’s just purchased all new equipment which will be depreciated over eight years. d. slow industry outlook II. Operating cash flow = $985. has no debt of any kind.($685.52 b.230. $940. then the firm: a.230 (See problem 84) Refer To: 02_84 Chapter 3 7.19. e. $1. Which two of the following are most apt to cause a firm to have a higher price-earnings ratio? I. Moe’s will have a lower profit margin. II and IV only d. Assuming all else equal: a.50 d. has no net working capital.00 e. investors with a low opinion of the firm a. c. $1. very low current earnings IV. I and III only e.71 + $450 . Answer: d 10. Answer: a 8. I and II only b. Refer to the figure above. If a firm produces a 10% return on assets and also a 10% return on equity. What is the operating cash flow for 2008? a. II and III only c.354.71 + $300 = $985. Moe’s will have a higher return on assets. has an equity multiplier of 2.$480) = $1. d. c. III and IV only Answer: b . The only difference between Joe’s and Moe’s is that Joe’s has old. b.71 c. Joe’s will have a lower return on equity. $1. fully depreciated equipment. e. high prospect of firm growth III. b.71 (See problem 84). is using its assets as efficiently as possible. also has a current ratio of 10. Moe’s will have a higher net income. $985.075.

fixed assets will have to increase at the same rate. regardless of the current capacity level. c. Marcie’s Mercantile wants to maintain their current dividend policy. e.000. $620 Answer: a Feedback: Using the Du Pont identity: Total assets = (1 + . d. and shows positive net income. number of common shares outstanding will increase at the same rate of growth.50) x $3.200 = $4. $480 b. Given these requirements. the internal rate of growth. debt-equity ratio will remain constant while retained earnings increase.25 = $6. which is a payout ratio of 40 percent. Total sales = $4. Answer: d 12. 60 percent of the sustainable rate of growth. Net income = $6. b. and number of common shares outstanding will all increase. fixed assets. $600 e. d. A firm has a return on equity of 15 percent.000 x . What is the amount of the net income? a. debt-equity ratio. the maximum rate at which Marcie’s can grow is equal to: a. $500 c. The firm does not want to increase their equity financing but are willing to maintain their current debt-equity ratio. the sustainable rate of growth. b.11. If a firm bases its growth projection on the rate of sustainable growth.200. e. then the: a.08 = $480 Difficulty level: Medium Reference: 03_95 . 60 percent of the internal rate of growth.800 x 1. The debt-equity ratio is 50 percent. The total asset turnover is 1. $540 d. 40 percent of the internal rate of growth. debt-equity ratio will have to increase. Answer: d 16.800. c. The total equity is $3.25 and the profit margin is 8 percent.

9 days Answer: e Feedback: Inventory turnover for 2008 = $4.200 ÷ $30 = 40 Refer To: 03_95 .) a. Days’ sales in inventory = 365 ÷ 178. 176. 30 b. 54 Answer: c Feedback: Times interest earned for 2008 = $1.990 = 2. 178.8 days d.1 days b.17. Refer to the figure above. How many days on average does it take Bayside to sell their inventory? (Use 2008 values.04. 50 e. 153. 126.060 ÷ $1. What is the times interest earned ratio for 2008? a.9 days c. 40 d. Refer to the figure above.5 days e. 36 c.9 days Refer To: 03_95 18. 127.

105 x (1 .(.83 percent Answer: c Feedback: Return on equity = . 6. You are comparing two annuities with equal present values.105 x (1 . The debt-equity ratio is 1.000 d.50 = .). The Green Giant has a 5% profit margin and a 40% dividend payout ratio.05 x 1. Option B has a higher present value than option A given a positive rate of return. Option A is the better choice of the two given any positive rate of return. Option B pays five annual payments of $4. 3. The cost to invest in either option is the same today. $5. c. 6. Option A is preferable because it is an annuity due.0 means TD = TE.92 percent d.000 the first year followed by four annual payments of $3.30 percent b.00 percent c. Answer: b Difficulty level: Medium Topic: UNEVEN CASH FLOWS AND PRESENT VALUE 3. You are comparing two investment options.405 Answer: d .40 x 1. $4.000 of income.46 percent b. e.000 of income..46 percent Chapter 004 2. Katelyn’s Kites has net income of $240 and total equity of $2.000 = . 5.105. What is the sustainable rate of growth? a.53 percent c. Which one of the following statements is correct given these two investment options? a. Option B has a lower future value at year 5 than option A given a zero rate of return. d.5 percent. What is the internal growth rate? a.40 and the equity multiplier is 1. 6.72 percent 20.000.06 x .06. 6.000 each. Sustainable growth = {.06724 = 6. 6.40)] = 2. Both options are of equal value given that they both provide $20. Both options will provide you with $20.40)]} = . The applicable discount rate is 7. $5. One annuity pays $5.72 percent d. The total asset turnover is 1.00 percent Answer: a Feedback: Total assets = $2. How much does the second annuity pay each year for twenty years if it pays at the end of each year? a. Return on assets = $240 ÷ $4. b. $5.000 + $2.50.000 each. 6.000 (The debt-equity ratio of 1.06 x .651 b.000 = $4..80 percent e. $5.19. 2.0 and the plowback ratio is 40 percent. 4.075 c.375 e.40] ÷ [1 . Option A pays five annual payments starting with $8. Internal growth = [.88 percent e.000 on the first day of each year for twenty years.40)} ÷ {1 [.

Feedback: Feedback: Because each payment is received one year later.000 x (1 + . $15.235. If your cost of money is 4.075) = $5. $15.5 percent.947.500 in student loans by the time you graduate.882.14 c. $479. Your car dealer is willing to lease you a new car for $299 a month for 60 months. what is the current value of the lease? a.42 .906. $480.40 Answer: d Feedback: Difficulty level: Medium Topic: ORDINARY ANNUITY PAYMENTS AND PRESENT VALUE 7. $471.37 e. $15. Payments are due on the first day of each month starting with the day you sign the lease contract. $476.375 Difficulty level: Medium Topic: ORDINARY ANNUITY VERSUS ANNUITY DUE 6.30 b. how much must you pay each month? a. You estimate that you will have $24. $16. If you want to have this debt paid in full within five years.65 c. then the cash flow has to equal: Feedback: $5. The interest rate is 6. $473.61 d.75 b.9 percent.79 d.

61 months e. The firm earns 6% compounded monthly on the funds it saves. 184. The owner of the firm is quite conservative and will only do this when the company has sufficient funds to pay cash for the entire expansion project. on this money throughout your retirement years.34 months d.08 months d.29 months c.97 months Answer: a Feedback: Difficulty level: Medium Topic: ORDINARY ANNUITY TIME PERIODS AND FUTURE VALUE 9. starting today. 227.289.000 a month for this purpose. You want to withdraw $2.54 Answer: c Feedback: Difficulty level: Medium Topic: ANNUITY DUE PAYMENTS AND PRESENT VALUE 8. $16. Today.97 months c. 213.926 in your retirement savings and have the funds invested such that you expect to earn an average of 3 percent. 249. 299. 185. 199. 234. 236.500 at the beginning of every month.e. Winston Enterprises would like to buy some additional land and build a new factory. How long will it be until you run out of money? a.84 months e. Management has decided to save $450. You have a total of $413. 284. The anticipated total cost is $136 million. you are retiring. How long does the company have to wait before expanding its operations? a.00 months b. compounded monthly.69 months Answer: b .61 months b.

40% d.000 payable immediately. $55.56 Answer: d .56 b. $148.56 d.283. The job offers an annual salary of $52.383. respectively. $152. $148.341. so it’s easiest to just use the calculator method to get an answer.383. 9.37% c. Feedback: Difficulty level: Medium Topic: ORDINARY ANNUITY INTEREST RATE 12. $150. 9.46% Answer: e Feedback: Feedback: This can not be solved directly. What is this offer worth to you today at a discount rate of 6 percent? a. and $60.19.34% b. 9.56 c. You can then use the calculator answer as the rate in the formula just to verify that you answer is correct. What is your average rate of return on your investments? a. 9. You are considering a job offer. 9.56 e. $150. You have been investing $120 a month for the last 15 years.000.983. your investment account is worth $47.000. The offer also includes a starting bonus of $2.000 a year for the next three years.Feedback: Difficulty level: Medium Topic: ANNUITY DUE TIME PERIODS AND PRESENT VALUE 10.283.42% e. Today.

the Jenkins Family Fun Center deposited $3.159. One year ago.430. It plans on making a final deposit of $7.000 liability it must pay three years from today. $19. $18. $20. How much will be available when it is ready to buy the equipment.54 e. it is adding another $5. The Bluebird Company has a $10.84 c.194.25 d. $19. $20.65 b.790.000 to this account. .Feedback: Difficulty level: Easy Topic: UNEVEN CASH FLOWS AND PRESENT VALUE 13.99 Answer: e Feedback: Difficulty level: Medium Topic: UNEVEN CASH FLOWS AND FUTURE VALUE 14.600 in an investment account for the purpose of buying new equipment four years from today. Today. assuming it earns a 7% rate of return? a.683.500 to the account next year.

00% c. How much does the Bluebird Company need to deposit today? a.867.80% e.079. $2.00% d. All you have to do now is determine which account you want to use such that you can earn the highest rate of interest possible. 13.8% on your credit card. $4.74 b.28 Answer: b Feedback: Difficulty level: Medium Topic: PRESENT VALUE. 13. Which account should you use based upon the annual percentage rates quoted by each bank? a.642. $4. Account A b. The interest is compounded monthly.108. You are paying an effective annual rate of 13.500 that you want to use to open a savings account.71% Answer: c Feedback: Difficulty level: Medium Topic: ANNUAL PERCENTAGE RATE 18. PAYMENTS AND FUTURE VALUE 16. You have $2. Account C .The company is opening a savings account so that the entire amount will be available when this debt needs to be paid.34 e.500 a year for the next three years.89 c. $3. $1. starting one year from today. You have found five different accounts that are acceptable to you. The account pays a 3% rate of return. 12. The plan is to make an initial deposit today and then deposit an additional $2.09 d.50% b. 14. What is the annual percentage rate on your account? a. 11. Account B c.276.

the input is: . Account D e. What is the maximum rate the bank can actually earn based on the quoted rate? a.22 percent Feedback: Using ex on a financial calculator: EAR = 8.22% e.22 percent Feedback: On the Texas Instruments BA II Plus.1 = 2. 7.71828.20% d.90% b.079 . 8.18% c.079 .39% Answer: d Feedback: EAR = e.1. 8. 8. EAR = 8. Account E Answer: b Feedback: Difficulty level: Medium Topic: EFFECTIVE ANNUAL RATE 20.9% annual percentage rate. The Smart Bank wants to appear competitive based on quoted loan rates and thus must offer a 7. 8.d.

higher than d. longer. . $246. current yield. b. How much will your dream house cost by the time you are ready to buy it? a.019.20 Answer: e Feedback: Difficulty level: Medium Topic: FUTURE VALUE Chapter 5 2. a discount. $247. The annual coupon payment of a bond divided by its market price is called the: a. a. less. a premium.5% per year over the next six years. shorter. longer d. higher than Answer: e Difficulty level: Medium Topic: BOND PRICES AND YIELDS 9. shorter c. d. higher than b.08 b.900. longer b. 2nd. $246. less than e. less.299. at par.831. e. The market price of _____ maturity bonds fluctuates _____ compared with _____ maturity bonds as interest rates change. coupon rate.079. c.94 e. capital gains yield. = .67 c. Today your dream house costs $189. Both b. ex. a premium.284. -1. a bond will sell at _____ when the yield to maturity is _____ the coupon rate. bid-ask spread. All else constant.0822 = 8. You hope to buy your dream house six years from now. a. equal to c. You expect housing prices to rise by an average of 4. shorter. $240.Feedback: . $246. Answer: b Difficulty level: Easy Topic: CURRENT YIELD 4. at par.67 d. yield to maturity.396. and c.22 percent Difficulty level: Medium Topic: CONTINUOUS COMPOUNDING 22. more.

What is the yield to maturity? a.000. You can then use the calculator answer as the rate in the formula just to verify that your answer is correct. 5% coupon bond pays interest annually.11 % decrease b.13% c. 12. so it’s easiest to just use the calculator method to get an answer. 14. Answer: a Difficulty level: Medium Topic: BOND VALUES 13. 14. The bond is currently priced at $894. Feedback: Difficulty level: Medium Topic: YIELD TO MATURITY 14. 10. 12.38 % decrease c. The bond has a face value of $1.40% e. None of these.e.5%? a.000.45% Answer: d Feedback: Feedback: This can not be solved directly. What is the change in the price of this bond if the market yield rises to 6% from the current yield of 4.67% b. 10.38 % increase d.13 % decrease e. Interest is paid semiannually. 8. 11. Winston Enterprises has a 15-year bond issue outstanding that pays a 9% coupon. 10.60 and has a par value of $1.13 % increase Answer: b .16% d. 10. A 12-year.

The bonds have a 7% coupon rate. 7. r = 5.0798) = (1 + r) x (1 + .35% c. 5. 7.34.97% c. D’Angelo’s bonds have a face value of $1.37% d. $9. 7.5%.98% yield to maturity and have a face value of $1. 5.025). What is the real rate of return on these bonds? a. 5.03% e. have a 7.93% b.35% Difficulty level: Medium Topic: FISHER EFFECT 18 A zero coupon bond with a face value of $1.000.42% e. 5. The bond matures in 25 years.Feedback: Difficulty level: Medium Topic: INTEREST RATE RISK 15. What is the implicit interest. in dollars. What is the current yield on these bonds? a. 5. The current rate of inflation is 2. The bonds of Frank’s Welding. pay an 8% coupon. 6.48% Answer: b Feedback: (1 + . for the first year of the bond’s life? a.08 .000 is issued with an initial price of $463.32% b.07% Answer: a Feedback: Difficulty level: Easy Topic: CURRENT YIELD 17. Inc.000 and a current market price of $1010.00% d. 6.

70 = t = .4) Feedback: $932 = $80[1 . A corporate bond with a face value of $1.48 d.92% Answer: d Feedback: Current Price = Int(PVIFAr.1/(1 + r)4]/r + $1000/(1 + r)4 Feedback: r = 10. straight d.4) + Face value(PVIFr.152 Difficulty level: Medium Topic: YIELD TO MATURITY Chapter 6 3. The current price of the bond is $932. 35% Answer: d Feedback: . a. The voting procedure where a shareholder grants authority to another individual to vote his/her shares is called _____ voting. 30% e. $14.15% e.10 x (1 . 8. proxy Answer: e Difficulty level: Easy Topic: PROXY VOTING . $12.b.48% c. at what tax rate is the investor indifferent to either bond? a. 6.000 matures in 4 years and has an 8% coupon paid at the end of each year. 20% b.t*) = . 10.05% b. 5.t*) = .30 or 30% Difficulty level: Medium Topic: MUNICIPAL BONDS 20. 25% c. democratic b.25 Answer: c Feedback: Difficulty level: Medium Topic: ZERO COUPON BOND AND IMPLICIT INTEREST 19. $21. $31. 11.58% d. cumulative c. What is the yield to maturity for this bond? a. If a taxable bond yields 10% and a municipal bond of comparable risk and maturity yields 7%.07 = (1 .47 e. 28% d.56 c. deferred e.

SuperDOT c. stock. brokerage Answer: b Difficulty level: Easy Topic: SUPERDOT SYSTEM 6. dividend yield c. Jack is assured one seat on the board. the company is voting to elect two new directors. The Keyser Co. it can be stated with certainty that the _____ of the Koster Co. market price. increase by 10% e. NASDAQ b.5. The price of ABC stock needs to _____ if Fred is to achieve his 10% rate of return. Given this. If straight voting applies. If straight voting applies. currently pays an annual dividend of $1. a. Inc. a. dividend yield e. d. He recently purchased shares of ABC stock at a price of $20 a share. Answer: c Difficulty level: Medium Topic: DIVIDEND YIELD VS. Jack can control both open seats. Which one of the following statements must be true given this information? a. If cumulative voting applies. has a total of 100 shares of stock outstanding. increase by 5% d. total return. b. remain constant b. Jack is assured one seat on the board. currently pays an annual dividend of $1. market price b. If cumulative voting applies. Jack does not own enough shares to control any of the seats. e. stock is greater than the _____ of the Keyser Co. Each share receives one vote. The stock pays a $1 a year dividend. Regardless of the type of voting employed. The electronic system used by the New York Stock Exchange which enables orders to be transmitted directly to a specialist is called the ______ system. capital gains. Internet e. and wants to exercise as much control as possible over the company. dividend yield. Instinet d. increase by 15% Answer: c Difficulty level: Medium Topic: DIVIDEND YIELD AND CAPITAL GAINS 8. c. Jack can control both open seats. The Koster Co. Inc. Beta.00 and plans on increasing its dividend by 3% annually. Fred Flintlock wants to earn a total of 10% on his investments. None of these. total return d. CAPITAL GAINS YIELD [Question] 7. decrease by 5% c. a. Jack owns 35 shares of stock in Beta. Answer: c Difficulty level: Medium Topic: CUMULATIVE VOTING . Presently.00 and plans on increasing that amount by 5% each year.

87. b. and IV Answer: e Difficulty level: Medium Topic: SHAREHOLDER RIGHTS 11. Answer: a Difficulty level: Medium Topic: PREFERRED STOCK 13. III. Answer: d Difficulty level: Medium Topic: STOCK MARKET REPORTING 15.5% Answer: e Feedback: Difficulty level: Medium . residual assets in a liquidation. The stock is currently selling for $62.42 this year.42 higher than today’s closing price. Based on this information. A dealer will buy the stock at $22. d. c.87. The owner of preferred stock: a. The earnings per share have increased by $1.87 and sell it at $26 a share. has the right to veto the outcome of an election held by the common shareholders. II. The closing price of a stock is quoted at 22.5% per year. Common stock shareholders are generally granted rights which include the right to: I. has the right to declare the company bankrupt whenever there are insufficient funds to pay dividends to the common shareholders. share in company profits. The earnings per share are equal to 1/26th of $22. with a P/E of 26 and a net change of 1. II. 3.5% c. has the right to collect payment on any unpaid dividends as long as the stock is non-cumulative preferred.60 annual dividend on its common stock. I. e. I and II only b. which one of the following statements is correct? a. 9.10 a share. III. vote for company directors. b. 5. The closing price on the previous day was $1.0142.0% e. e. is entitled to a distribution of income prior to the common shareholders. Martha’s Vineyard recently paid a $3. II and III only c.10. IV. vote on proposed mergers.5% d. a. I. 6. c. and IV only e. The stock increased in value between yesterday’s close and today’s close by $. What is the market rate of return? a.42. II.5% b. d. I and IV only d. receives tax-free dividends if he is an individual and owns more than 20% of the outstanding preferred shares. This dividend increases at an average rate of 3. 2.

preferred stock which he says provides him with a constant 6.87 e.80 c. Inc. $5. $. $5. Weisbro and Sons common stock sells for $21 a share and pays an annual dividend that increases by 5% annually. $. The stock is currently priced at $45. the company plans on paying a constant $1 a share dividend indefinitely. $3. $3. Bill Bailey and Sons pays no dividend at the present time.58 Answer: b Feedback: Difficulty level: Challenge Topic: DIFFERENTIAL GROWTH DIVIDENDS 20. $4.0658 x $45.15 c.54 e.88 Answer: b Feedback: Difficulty level: Medium Topic: DIVIDEND AMOUNT 18. The market rate of return on this stock is 9%. How much are you willing to pay to buy a share of this stock if your required return is 14%? a. What is the amount of the last dividend paid by Weisbro and Sons? a.Topic: REQUIRED RETURN 16.60 a share. $5. After that time.00 b. $3.60 = $3.25 c. $.46 e.84 d.77 b. $.30 a share for two years commencing two years from today.50 d.82 b. $5. Jim owns shares of Abco.62 Answer: a Feedback: D = .00 Difficulty level: Easy Topic: PREFERRED STOCK . What is the amount of the dividend per share? a. $3. The company plans to start paying an annual dividend in the amount of $. $3. $.58% rate of return.39 d.

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