Ebook Contemporary Financial Management 13Th Edition Moyer Test Bank Full Chapter PDF

Contemporary Financial Management
13th Edition Moyer Test Bank

Visit to download the full and correct content document: https://testbankdeal.com/dow
nload/contemporary-financial-management-13th-edition-moyer-test-bank/
CHAPTER 7: COMMON STOCK: CHARACTERISTICS, VALUATION,
AND ISSUANCE
1. Which of the following is not a characteristic of common stock:
a. has no maturity date
b. considered a permanent form of long-term financing
c. has claims on assets prior to those of preferred stock
d. is a residual form of ownership
ANSWER: c
2. Stockholders' equity includes all of the following except:

a. Common stock at par
b. Treasury stock
c. Contributed capital in excess of par
d. Retained earnings
ANSWER: b
3. The book value per share of common stock is calculated by dividing by the number of shares outstanding
a. market value of common stock
b. total assets
c. total stockholders' equity plus preferred stock
d. total common stockholders' equity
ANSWER: d
4. The market value of common stock is primarily based on

a. the firm's future earnings
b. book value
c. total assets
d. retained earnings
ANSWER: a
5. Common stockholders have a number of general rights, including all of the following except:
a. voting rights
b. management rights
c. asset rights
d. dividend rights
ANSWER: b
© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 7: Common Stock: Characteristics, Valuation, and Issuance
6. The book value of an asset represents

a. the market value
b. the discounted cash flow value
c. the historic acquisition cost of the asset
d. stockholders' acquisition value
ANSWER: c
7. In a reverse stock split

a. the number of shares are decreased
b. the market value is decreased
c. retained earnings decrease
d. par value decreases
ANSWER: a
8. Which of the following is not an advantage of common stock financing?

a. no fixed dividend obligation
b. can lower the firm's weighted cost of capital
c. allows the firm a greater degree of flexibility in financial planning
d. involves relatively high flotation costs
ANSWER: d
9. AVIX has 6.8 million shares outstanding and the firm's charter provides for a majority voting procedure. The
company has seven directors up for reelection. What is the minimum number of shares needed to ensure the
election of one director?
a. 850,001
b. 5,950,001
c. 3,400,001
d. none of these
ANSWER: c
10. A change in the market price of an asset will occur as a result of changes in:
a. investors’ required rates of return
b. investors’ expected returns from the asset
c. book value of the asset
d. investors’ required rates of return and their expected returns from the asset
ANSWER: d
11. In the constant-growth dividend valuation model, the required rate of return must be the dividend growth
rate in order for the formula price to be meaningful.
a. less than
b. equal to
c. greater than
d. proportional to
ANSWER: c
12. In the constant-growth dividend valuation model, the required rate of return on a common stock can be shown
to be equal to the sum of the dividend yield plus:
a. Yield-to-maturity
b. Cost of capital
c. Present value yield
d. Price appreciation yield
ANSWER: d
13. The valuation of common stock is considerably more complicated than the valuation of bonds or preferred
stocks because:
a. The returns can take two forms, i.e. annual cash payments and price appreciation
b. Common stock dividends are normally expected to grow and not remain constant
c. The returns from common stocks are generally larger and more certain than the returns from bonds and
preferred stocks
d. The returns can be in annual cash payments or price appreciation, and they are normally expected to grow
and not remain constant
ANSWER: d
14. Many preferred stocks are treated as in determining their values.

a. Fixed assets
b. Perpetuities
c. Convertible securities
d. Constant growth securities
ANSWER: b
15. In the valuation of common stock, the simple annuity and perpetuity formulas used in the valuation of bonds
and preferred stock are not generally applicable because:
a. Investors buy common stock for much different reasons than they buy bonds or preferred stock.
b. Returns accruing to common stock should never be capitalized (discounted) in order to determine a price.
c. Unlike bonds and preferred stock, common-stock is a short term investment.
d. Common stock dividends are normally expected to grow over time, rather than being constant as are
payments on most bonds and most preferred stock.
ANSWER: d
16. One of the assumptions of the constant growth dividend valuation model is that
a. the investor’s required rate of return is equal to the expected dividend yield.
b. the required rate of return is greater than the dividend growth rate
c. the required rate of return increases at a constant rate
d. the dividend rate (in dollars) will remain constant
ANSWER: b
17. The most important factor to be considered in the valuation of a closely held firm is
a. earnings growth
b. book value of the firm
c. earnings capacity
d. the general economic outlook
ANSWER: c
18. Stockholders’ equity equals

a. both preferred stock and common equity
b. total claims
c. additional paid-in capital plus capital surplus
d. total liabilities and total surplus
ANSWER: a
19. A common stock’s book value is calculated

a. as a multiple of the stock’s price/earning ratio
b. on the basis of income statement ratios
c. on the basis of balance sheet figures
d. on the value of income statement figures
ANSWER: c
20. When a stock is split 2 for 1, then the figure on the firm's balance sheet is cut in half.
a. value of the common stock
b. par value
c. capital surplus
d. retained earnings
ANSWER: b
21. From an accounting standpoint, stock dividends involve a transfer from the
a. common stock account
b. cash account
c. retained earnings account
d. capital surplus account
ANSWER: c
22. Which one of the following is not a reason a firm may decide to repurchase its own stock?
a. future corporate needs
b. financial restructuring
c. investment
d. disposition of excess warrants
ANSWER: d
23. Dillinger, Inc. is planning to raise additional capital for expansion by selling 500,000 common shares at $16
each. The existing stockholders’ equity section of their balance sheet is shown below. What will the retained
earnings figure be immediately after the sale of the new equity?
Common stock; $1 par value; authorized, 3,000,000 shares; issued and

outstanding, 3,000,000 shares $ 3,000,000
Additional paid-in capital 6,500,000
Retained earnings 4,752,000
Total stockholders’ equity $14,252,000
a. $12,252,000
b. $14,000,000
c. $4,752,000
d. $3,500,000
ANSWER: c
24. The returns investors receive from holding common stocks may be in two forms. They are
a. cash dividend payments and capital gains
b. future earnings and treasury stock
c. stock splits and stock dividends
d. cash dividends and stock dividends
ANSWER: a
25. The constant growth dividend valuation model does not hold when
a. ke is greater than g
b. dividends are growing faster than 4 percent
c. g is greater than ke
d. the current dividend is known
ANSWER: c
26. If the general level of interest rates in the economy moves up, then investors will require a rate of return
on securities, and, in general, stock prices should , ceteris paribus.
a. lower, decline
b. higher, increase
c. higher, decline
d. lower, increase
ANSWER: c
27. If competition in an industry increases, the future growth potential should

a. decrease
b. increase
c. not be affected
d. be negative
ANSWER: a
28. The zero growth dividend valuation model is used when a firm's future dividends are expected to remain
constant,
a. so the value of the firm should also remain constant
b. so the required rate of return should also remain constant
c. and the firm cannot be valued
d. forever
ANSWER: d
29. When evaluating a firm based on price/earnings multiples, the evaluator must determine the price/earnings
multiple for
a. the general market
b. the S&P 500
c. firms in the same industry
d. small capitalization firms
ANSWER: c
30. The rights of stockholders to share equally on a per share basis in any distributions of corporate earnings is
known as ____.
a. preemptive rights
b. voting rights
c. asset rights
d. dividend rights
ANSWER: d
31. result in what is known as treasury stock.

a. Stock dividends
b. Stock repurchases
c. Stock splits
d. Reverse stock splits
ANSWER: b
32. A firm that wishes to raise additional equity capital by selling a portion of the existing owners' stock while
maintaining control of the firm should consider a .
a. stock split
b. stock dividend
c. share repurchase
d. separate class of nonvoting stock
ANSWER: d
33. A firm may use a stock repurchase .

a. as part of a financial restructuring
b. to dispose of excess cash
c. to reduce overhead
d. as part of a financial restructuring and to dispose of excess cash
ANSWER: d
34. In the constant growth dividend valuation model, the required rate of return on a common stock is equal to the
sum of the ____.
a. capital gains yield and cost of capital
b. present value yield and dividend yield
c. cost of capital and dividend yield
d. capital gains yield and dividend yield
ANSWER: d
35. In the constant growth dividend valuation model, it is assumed that the .
a. dividend growth rate exceeds the required rate of return
b. firm's future dividend payments are expected to grow at a constant rate forever
c. dividend cannot be forecast for any future time
d. firm is experiencing a period of poor performance, after which normal growth is expected
ANSWER: b
36. An arrangement whereby an investment banker agrees to purchase an entire new issue of securities is called
a. competitive bidding
b. syndication
c. a negotiated bid
d. underwriting
ANSWER: d
37. The difference between the selling price to the public of a new issue and the net the issuing firm actually
receives is known as the
a. negotiating spread
b. underwriting spread
c. bid spread
d. SEC cost
ANSWER: b
38. A is a group of underwriters who agree to underwrite a new issue in order to spread the risk.
a. purchasing syndicate
b. cartel
c. bidding group
d. financial institution
ANSWER: a
39. All of the following are advantages of private security placements (over a public offering) except
a. reduced flotation costs
b. greater flexibility
c. lower interest rates
d. save time
ANSWER: c
40. A firm may sell its common stock directly to its existing stockholders through a
a. private placement
b. cash offering
c. rights offering
d. direct placement
ANSWER: c
41. Direct issuance costs are

a. higher for common stock than for preferred stock issues
b. dependent on the quality of the issue
c. dependent on the size of the issue
d. all of these are correct
ANSWER: d
42. In marketing a new security issue, the investment banker assumes the risk of not being able to sell the security
at a favorable price in each of the following cases except:
a. a best efforts offering
b. a negotiated underwriting
c. a competitively bid underwriting
d. assumes the risk in all of the above
ANSWER: a
43. An investment banker is generally thought to be qualified to advise a corporation on a variety of matters,
including all the following except:
a. long range financial planning
b. the marketing of securities
c. the timing of securities
d. the firm's new product marketing decisions
ANSWER: d
44. In addition to direct costs, there are other costs associated with new security offerings. These other costs
include all of the following except:
a. the cost of incentives such as the “Green Shoe” option
b. the cost of overpricing
c. the cost of stock price declines
d. the cost of management time
ANSWER: b
45. A procedure that allows a firm to file a master registration statement with the SEC and then sell an offering of
common stock in small increments is known as .
a. a Green Shoe option
b. an IPO
c. rule 215
d. a shelf registration
ANSWER: d
46. Which of the following are reasons why large multinational corporations may sell equity in international
markets rather than selling stock only in the country in which they are domiciled?
a. Global equity offerings result in higher price per share.
b. The existence of a 12-hour per day trading schedule
c. Higher positive returns around the time of the announcement to sell in global markets
d. Private placements are not an option.
ANSWER: a
47. The P/E ratio indicates

a. how much investors are willing to pay for $1 of current earnings
b. the current yield
c. the current price
d. how risky the stock is
ANSWER: a
48. Common stock dividends normally are paid

a. monthly
b. quarterly
c. semi-annually
d. annually
ANSWER: b
49. In stock quotations, the last column, showing the net change, indicates the net change in
a. a share's price during the day
b. the dividend yield
c. the closing price from the previous day's close
d. a share's high price during the day
ANSWER: c
50. What is the value of a share of stock of HOV Inc. to an investor who requires a 12 percent rate of return if
HOV's current dividend is $1.20? Assume earnings and dividends are expected to grow at a compound annual
rate of 7 percent.
a. $24.00
b. $18.34
c. $25.68
d. $19.62
ANSWER: c
RATIONALE: Solution: P0 = $1.20(1 + 0.07)/(0.12 - 0.07) = $25.68
51. The current price of Zebar is $32.00 and the current dividend is $.60. What is an investor's required rate of
return on Zebar if dividends are expected to grow perpetually at a compound annual rate of 8 percent?
a. 9.88%
b. 11.38%
c. 18.75%
d. 10.03%
ANSWER: d
RATIONALE: Solution: ke = $0.60(1.08)/$32 + 0.08 = 10.03%
52. Fast Wheels, Inc. expects to pay an annual dividend of $0.72 next year. Dividends have been growing at a
compound annual rate of 6 percent and are expected to continue growing at that rate. What is the value of a
share of stock of Fast Wheels to an investor who requires a 14 percent rate of return?
a. $9.00
b. $5.14
c. $9.54
d. $8.16
ANSWER: a
RATIONALE: Solution: ke = $0.72/(0.14 – 0.06) = $9.00
53. What is the current value of the common stock of Clump Dump Kitty Litter, Limited if you know the current
dividend yield is 6.14%, the PE is 16, and the annual dividend is $1.35?
a. $21.60
b. $21.99
c. $8.29
d. $98.24
ANSWER: b
RATIONALE: Solution: Price = dividend/current yield = $1.35/0.0614 = $21.99
54. Bellbottom Gongs, Inc. pays a quarterly dividend of $0.70, has a PE ratio of 14 and closed yesterday at
$48.25.What is the dividend yield?
a. 5.45%
b. 1.45%
c. 5.8%
d. 7.25%
ANSWER: c
RATIONALE: Solution: .70(4)/48.25 = .058 or 5.8%
55. If the common stock of Comdisco pays an annual dividend of $0.28, has a PE ratio of 11 and closed at 25,
what are the current earnings per share?
a. $3.08
b. $2.27
c. $7.00
d. $1.12
ANSWER: b
RATIONALE: Solution: EPS = P/PE = $25/11 = $2.27
56. If Night Owl Lamps pays an annual dividend of $1.54, has a PE of 13, and its last closing price was 40, then
its dividend yield must be:
a. 11.85%
b. 3.85%
c. 15.40%
d. 3.25%
ANSWER: b
RATIONALE Solution: $1.54/$40 = 0.0385 or 3.85%
57. Zero-Sum Enterprise expects to pay an annual dividend of $0.48 next year. Dividends and earnings have been
growing at a compound annual rate of 8 percent and are expected to continue growing at that rate. What is an
investor's required rate of return on Zero-Sum if the current price is $12?
a. 12.3%
b. 12.0%
c. 10.0%
d. 10.3
ANSWER: b
RATIONALE: Solution: ke = $0.48/$12 + 0.08 = 12%
58. Assume Zero-Sum Enterprise pays an annual dividend of $1.40 per share and that neither earnings nor
dividends are expected to grow in the future. What is the value of Zero-Sum's stock to an investor who
requires a 14 percent rate of return?
a. $14.00
b. $10.00
c. $20.00
d. 0
ANSWER: b
RATIONALE: Solution: P0 = $1.40/0.14 = $10
59. Over the past 7 years the dividends of Sunshine Mining have grown from $0.24 to the current level of $.53.
What is the approximate annual compound growth rate of Sunshine's dividends?
a. 20.8%
b. 12.0%
c. 9.5%
d. 10.0%
ANSWER: b
RATIONALE: Solution: $0.53/$0.24 = 2.2083 or approximately 12% from Table I
60. Assume that the dividend ($3.25) on Central Power Company's common stock issue is paid annually at the
end of the year. This dividend is not expected to increase for the foreseeable future. Determine the value of
this stock to an investor who requires a 12 percent rate of return.
a. $3.25
b. $39
c. $12
d. $27.08
ANSWER: d
RATIONALE: Solution: P0 = $3.25/0.12 = $27.08
61. During the past 8 years, Beef Wellington Cattle Company’s common stock dividends have grown from $2.00
to $3.19. Estimate the compound annual dividend growth rate over the 8 year period.
a. 59.5%
b. 6%
c. 12%
d. 19%
ANSWER: b
RATIONALE: Solution: $2.00 = $3.19(PVIFg,8)
(PVIFg,8) = $2.00/$3.19 = .627
g = 6%, from Table II
62. Moonshine Company, a producer of fine liqueurs, has earnings and common stock dividends have been
growing at an annual rate of 4 percent over the past several years. The firm currently (t = 0) pays an annual
dividend of $4.00. Assuming that Moonshine's common stock dividends continue growing at the past rate for
the foreseeable future, determine the value of the company's common stock to an investor who requires a 13
percent rate of return on these securities.
a. $44.44
b. $36.81
c. $46.22
d. $48.62
ANSWER: c
RATIONALE: Solution: P0 = $4.16/(0.13 – 0.04) = $46.22
63. What is the rate of return to an investor in the stock of Bajo, Inc. if the current dividend of $0.80 is not expected to
change in the foreseeable future? The current price of Bajo is $13.25.
a. 6.04%
b. 8.0%
c. 24.15%
d. 11.06%
ANSWER: a
.80
RATIONALE: Solution: D/P0 = = .0604 or 6.04%
13.25
64. The stock of Melody Music City is selling for $37.50 and pays a current annual dividend of $1.10. What is the
implied growth rate of dividends for this firm (assume dividends are expected to grow at a constant rate) if an
investor's required rate of return is 14 percent?
a. 11.07%
b. 14.0%
c. 11.4%
d. 10.75%
ANSWER: d
RATIONALE: Solution: $37.50 = $1.10(1 + g)/(0.14- g)
g = 10.75%
65. If the stock of Sun Computers is selling for $34 and the current dividend is $0.48, what is the implied constant
growth rate of dividends to an investor who requires a 14% rate of return?
a. 12.54%
b. 12.41%
c. 14.00%
d. 15.41%
ANSWER: b
RATIONALE: Solution: 34 = .48(1 + g)/(.14 - g)
g = 12.4 1%
66. Phillips Industries common stock currently sells for $50 and is expected to pay a dividend of $3.00 next year.
Determine the implied growth rate for Phillips Industries dividends assuming that an investor's required rate of
return on this stock is 14%.
a. 6%
b. 8%
c. 14%
d. 20%
ANSWER: b
RATIONALE: Solution: 0.14 = $3.00/$50 + g
g = 0.08 or 8%
67. CPU Company currently (t = 0) pays a dividend of $2.50 per share on its common stock. Dividends are
expected to increase at the rate of $.25 per share for the next several years. Determine the current value of
CPU's common stock to an investor who expects to be able to sell the stock for $35 per share after 3 years,
given that the investor requires a 14 percent rate of return on this security.
a. $24
b. $30.54
c. $19.64
d. $68.75
ANSWER: b
RATIONALE: Solution: P0 = $2.75(0.877) + $3.00(0.769) + $3.25(0.675) + $35(0.675) = $30.54
68. What is the current value of Frocks & Socks Clothiers, Inc. to an investor who has a required rate of return of
12 percent? The current dividend is $1.00 and the dividends are expected to grow 8 percent per year for 3
years. At the end of 3 years the investor expects to sell the security for $76.
a. $79.51
b. $56.90
c. $51.13
d. $76.00
ANSWER: b
RATIONALE: Solution:
$1(1.08) = $1.08(0.893) = $0.964
$1.08(1.08) = $1.166(0.797) = $0.930
$1.166(1.08) = $1.26(0.712) = $0.897
$76(0.712) = $54.11
Total = $56.90
69. What is the current value of a share of HiGro common stock that does not pay a current dividend? Earnings
are growing at a 20 percent per year rate for the next 10 years. Assume the investor has a required rate of
return of 15 percent and expects to sell the security in 5 years. Current earnings are $1.50 per share.
a. $56.87
b. $62.21
c. $25.00
d. There is insufficient information to solve this problem.
ANSWER: d
RATIONALE: Solution: None of these are correct. There is insufficient information in the problem.
70. What is the current value of a share of Augat common stock if its current dividend is $1.50 and dividends are
expected to grow at the annual compound growth rate of 20 percent into the foreseeable future? Assume the
investor has a required rate of return of 15 percent, and expects to sell the security in 5 years.
a. $56.87
b. $30.00
c. $25.00
d. The constant growth rate model cannot be used because the growth rate is greater than the required rate of
return.
ANSWER: d
RATIONALE: Solution: The constant growth rate model cannot be used because the growth rate is greater
than required rate of return.
71. What is the current value of a share of Chyrox if its current dividend is $1.50 and dividends are expected to
grow at an annual rate of 20 percent for the next 5 years? Assume the investor has a required rate of return of
15 percent and expects to sell the security in 5 years for $72.
a. $44.31
b. $35.78
c. $39.63
d. $72.00
ANSWER: a
$1.50(1.20) = 1.80(0.87) = $ 1.57
$1.80(1.20) = 2.16(0.756) = 1.63
$2.16(1.20) = 2.59(0.658) = 1.70
$2.59(1.20) = 3.11(0.572) = 1.78
$3.11(1.20) = 3.73(0.497) = 1.85
$72(0.497) = 35.78
Total = $44.31
72. The earnings and dividends of Nebula Computer Co. are expected to grow at an annual rate of 15 percent over
the next 4 years and then slow to a constant growth rate of 8 percent per year. Nebula currently pays a
dividend of $0.50 per share. What is the value of Nebula stock to an investor who requires a 14 percent rate of
return?
a. $9.31
b. $15.73
c. $11.35
d. $2.04
ANSWER: c
Year
1 $0.50(1.15) = 0.575(.877) = $0.504
2 $0.575(1.15) = 0.661(.769) = .509
3 $0.661(1.15) = 0.760(.675) = .513
4 $0.760(1.15) = 0.874(.592) = .518
= $ 2.04
P4 = $0.944/(0.14 – 0.08) = $15.73(0.592) = 9.31
Total = $11.35
73. During the past 8 years, UTX Company common stock dividends have grown from $2.70 to $5.00 per share
(currently). Determine the value of UTX common stock to an investor who requires a 16% rate of return,
assuming that dividends continue growing for the foreseeable future at the same rate as over the past 8 years.
a. $62.50
b. $31.25
c. $67.50
d. $46.96
ANSWER: c
RATIONALE: Solution: PV0 = FVn(PVIFg,n)
$2.70 = $5.00(PVIFg,8)
g = 0.08 (8%) from Table II
P0 = $5.40/(0.16 - 0.08) = $67.50
74. Lawton Company common stock currently sells for $38 and pays (year 0) a dividend of $2. Determine the
implied growth rate for Lawton assuming that an investor's required rate of return is 12% and that the stock
can be evaluated using a constant growth valuation model.
a. 6.74%
b. 17.26%
c. 6.40%
d. 3.80%
ANSWER: c
RATIONALE: Solution: 0.12 = $2(1 + g)/$38 + g
g = 0.064, or 6.4%
75. Helix common stock currently sells for $30 and its current dividend is $1.50. If the required rate of return on
Helix stock is 15%, what is the implied growth rate of its earnings and dividends?
a. 13.5%
b. 9.5%
c. 10.0%
d. 30.0%
ANSWER: b
$1.50(1 + g )
RATIONALE: Solution: 0.15 = +g so g = 0.095
$30
76. Over the past 5 years, Dippity Doo-Dah Party Dips’ common stock earnings per share have grown from $0.62
to $0.91. If an investor in Dippity’s stock is assumed to have a required rate of return of 14%, what is the
current value of Dippity if its current dividend is 0.12? Assume EPS will continue to grow at a constant rate.
a. $2.16
b. $1.62
c. $4.94
d. $2.00
ANSWER: a
RATIONALE : Solution: $0.91 = $0.62(FV1Fg,s)
FVIF = $0.91/$0.62 = 1.468
so g = 8%
p0 = $0.12(1.08)/(0.14 – 0.08) = $2.16
77. High Brow Cow Farms, producers of the finest dairy products, has common stock that sells for $54.
Dividends are expected to continue to grow at a rate of 8% annually. If investors in High Brow require a 13%
rate of return, what is the current dividend?
a. $2.70
b. $2.50
c. $4.00
d. $3.25
ANSWER: b
D0(1.08)
$54 =
0.13 − 0.08
D0(1.08)
78. Keeping Pace Enterprises, makers of track and field equipment, has common stock that sells for $29, and its
dividends are expected to grow at a rate of 9 percent annually. If investors in Pace require a return of 14%,
what is the expected dividend next year?
a. $1.33
b. $2.40
c. $1.45
d. $1.60
ANSWER: c
D0(1.09) so D0 = 1.33
$29 =
0.14 – 0.19 and D1 = 1.33(1.09) = $1.45
79. The common stock of Kute & Kuddly Kids Clothes, Inc. currently sells for $88.50 and its current (D0)
dividend is $1.10. Determine the implied growth rate for Kute assuming that an investor's required rate of
return is 14% and that earnings and dividends are expected to grow at a constant rate.
a. 13.9%
b. 12.3%
c. 13.8%
d. 12.6%
ANSWER: d
$1.10(1 + g ) so g = 0.126 or 12.6%

$89 =
0.14 − g
80. Helluva stock currently pays a dividend of $1.20 per share. Dividends are expected to increase at the rate of
$0.10 per share for the next eight years. Determine the current value of Helluva common stock to an investor
who expects to be able to sell the stock for $28 after 5 years. Assume that the investor requires a 12 percent
rate of return on the security.
a. $66
b. $28
c. $21.20
d. $15.88
ANSWER: c
RATIONALE: Solution: P0 = $1.30(.893) + $1.40(.797) + $1.50(.712) + $1.60(.636) + $29.70(.567)
= $1.1609 + $1.1158 + $1.068 + $1.0176 + $16.3399
= $21.20
81. Over the past 10 years the dividends of Allegro have grown from $0.45 to $1.82 per share. Determine the
value of Allegro's common stock to an investor who requires a 20% rate of return, assuming that dividends
continue growing at the same rate as they grew over the past 10 years.
a. $36.40
b. $41.86
c. $43.68
d. $20.93
ANSWER: b
RATIONALE: Solution: P0 = FV(PVIFg,n)
$.45 = $1.82(PVIFg,10)
(PVIFg,10) = 0.247
g = 15% from Table II
P0 = $1.82(1.15)/(0.20 – 0.15) = $41.86
82. Zimmer's common stock sells for $37 and its dividend is expected to grow at a rate of 8 percent annually.
What is the expected dividend (D1) given that an investor requires a return of 16 percent?
a. $2.74
b. $3.20
c. $5.92
d. $2.96
ANSWER: d
RATIONALE: Solution: $37 = D1/(0.16 – 0.08)
D1 = $2.96
83. The earnings of Foggy Futures Weather Forecasting Company are expected to grow at an annual rate of 14%
over the next 5 years and then slow to a constant rate of 10% per year. Foggy currently pays a dividend of
$0.36 per share. What is the value of Foggy’s stock to an investor who requires a 16% rate of return?
a. $7.97
b. $7.76
c. $14.42
d. $11.11
ANSWER: b
Year
1 $.36(1.14) = $.410(.862) = $ .352
2 .41(1.14) = .468(.743) = .348
3 .467(1.14) = .533(.641) = .342
4 .533(1.14) = .608(.552) = .336
5 .608(1.14) = .693(.476) = .330
P5 = $.693(1.10)/(0.16 – 0.10) = $12.71(0.476) = 6.050
Total = $7.758
84. During the past 10 years, Saturn's common stock dividends have grown from $0.24 to $0.62. If the past
growth of dividends is expected to continue at the same rate in the future, what is the current value of Saturn's
common stock to an investor who requires an 18% rate of return?
a. $7.75
b. $3.79
c. $8.53
d. $10.42
ANSWER: c
RATIONALE: Solution: FV = P0(FVIFg,n)
$.62 = $.24(FVIFg,10)
(FVIFg,10) = 2.5833
g = 9.95 (or approx. 10%)
P0 = $.62(1.10)/(0.18 – 0.10) = $8.53
85. HiGlo’s common stock sells for $23.50 and its earnings are expected to grow at a rate of 12% annually. What
is the current dividend (D0) for an investor who requires a 15% return?
a. $0.71
b. $0.63
c. $0.34
d. $0.31
ANSWER: b
D0(1.12)
23.50 = D0 = $0.63
.15 − .12
86. During the past 7 years, Burger Flippin’ Corp.’s earnings have grown from $0.75 to $1.95 per share. If the
past growth rates are expected to continue into the future, what is the current value of Flippin’s common stock
to an investor who requires a 16% rate of return?
a. $97.50
b. $13.93
c. $111.15
d. $48.50
ANSWER: c
RATIONALE: Solution: .78/1.95 = .4 = PVIF
i = 14% from Table II
1.95(1.14 )
P0 = = $111.15
.16 − .14
87. Quantum, Inc. has 5.4 million shares outstanding and the firm's charter provides for cumulative voting. The
company has a twelve-member board of directors, all of whom are up for reelection. What is the minimum
number of shares needed to ensure the election of one director?
a. 450,001
b. 415,386
c. 431,251
d. 425,421
ANSWER: b
1 x (5,400,000 )
Number of shares = + 1 = 415,386
12 + 1
88. AVTX has 6.8 million shares outstanding and the firm's chatter provides for cumulative voting. The company
has a seven member-board of directors, all of whom are up for reelection. What is the minimum number of
shares needed to ensure the election of two directors?
a. 850,001
b. 5,950,001
c. 3,400,001
d. 1,700,001
ANSWER: d
2 x 6,800,000
RATIONALE: Solution: # shares = + 1 = 1,700,000
7 +1
89. What is the estimated price of Once in a Blue Moon stock that has the following dividends? The return on
similar investments is I8%. (Round the growth rate to the nearest whole percent)
YEAR DIVIDENDS
2014 $2.50
2013 $2.48
2012 $2.36
2011 $2.32
a. $17
b. $13
c. $22
d. $50
ANSWER: a
RATIONALE: Find the dividend growth rate using a calculator
N=3
PV = –2.32
FV = 2.50
Solve for I = 2.52% rounded to the nearest whole percent - Dividend growth rate is 3%
To find the expected dividend = 2.50(1.03) = 2.58
Expected dividend (D1) is $2.58.
$2.58
= $17.17
.18 − .03
90. Listed below are some of the responsibilities of investment bankers. Which of the following is NOT one of
them?
a. They can purchase securities
b. They market securities
c. They directly influence the objectives and direction of the company.
d. They arrange private loans and leases
ANSWER: c
91. The zero growth method is used to value

a. common stock
b. required rate of return
c. bonds
d. preferred stock
ANSWER d
92. All of the following are ways that securities are offered to the public in a public offering EXCEPT:
a. Securities are sold through competitive bidding
b. Securities are sold through negotiated underwriting to a purchasing syndicate
c. Securities are sold through excess-market pricing
d. Securities are sold on a best efforts basis
ANSWER: c
93. In a liquidation of a firm due to bankruptcy, which of the following usually gets paid last?
a. bondholders
b. preferred stockholders
c. common stockholders
d. employees wages
ANSWER: c
94. The returns from most common stocks are

a. positively correlated with each other
b. negatively correlated with each other
c. uncorrelated with each other
d. correlated to future forecasted earnings
ANSWER: a
95. By-Your-Leave Travel Agency has reported the dividends listed below. What return could be expected? The
price of the stock is $18. (Round the growth rate to the nearest whole percent)
Years Dividends
2010 $1.12
2011 $1.15
2012 $1.18
2013 $1.21
2014 $1.24
a. 10.11%
b. 12.02%
c. 8.15%
d. 9.74%
ANSWER: a
RATIONALE: Finding the growth rate by calculator:
N=4
PV = –1.12
FV = 1.24
Solve for I= 2.57 Rounded to 3%
Find the next dividend D1:

1.24(1.03) = 1.28
1.28
+ .03 = 10.11%
18
96. Chill Pill Pharmaceuticals is expecting a growth rate of 14% for the next two years due to its new drug.
Thereafter it should level to an 8% growth rate. The last dividend paid was $.65 per share. What price should
the stock sell for if investors require 12% return.
a. $18.14
b. $22.75
c. $19.47
d. $20.16
ANSWER: c
RATIONALE: Solution using a calculator:
D1 = .65(1.14) = .74
D2 = .74(1.14) = .84
.91
DL = .82(1.08) = = 22.75
.12 − .08
Find the PV of the Dividends and Price using a calculator:
N = 1 I = 12 FV = .74 Solve for PV = .66
N = 2 I = 12 FV = .84 Solve for PV = .67
N = 2 I = 12 FV = 22.75 Solve for PV = 18.14
.66 + .67 + 18.14 = $19.47
97. Common stockholders’ claim on assets is considered after which of the following:
a. Board of Directors’ pay
b. Preferred Stockholders
c. Both a and b
d. Neither a nor b
ANSWER: b
98. If Crafty Creatures Cage Maker stock sells for $18 per share and the firm nets $12 per share, the difference
is called the:
a. Underwriting Spread
b. Profit
c. SEC charge
d. Refund
ANSWER: a
99. An option for selling securities reserved for larger firms (MVE > $150,000,000) whereby the firm files a
master registration statement and then can small increments of the stock over the next two years by filing a
short form statement is called:
a. SEC Registration
b. Red Herring
c. Shelf Registration
d. Commission Registration
ANSWER: c
100. King of the Roost Chicken Farms has issued the following dividends. What would be the growth rate in
dividends (rounded)?
YEARS DIVIDENDS
2014 $3.00
2013 $2.50
2012 $1.75
2011 $1.54
a. 15%
b. 25%
c. 12%
d. 21%
ANSWER: b
RATIONALE: Solution using a financial calculator:
N=3
PV = –1.54
FV = 3.00
Solve for I = 24.89%
101. In valuing a company that sells products and services, is the most important factor in the valuation of
closely held firms.
a. management effectiveness
b. profit
c. cash on hand
d. earnings capacity
ANSWER: d
102. Haulin’ It Towing Company is selling a stock for $16. The stock just paid a dividend of $.60 and this
dividend is expected to grow by 15% per year for three years. After that it will grow at a constant rate of 4%.
The stock’s beta is 1.7, the risk-free rate of interest is 1.75% and the market risk premium is 5.25%. Should
you buy the stock? (Round to dollars and cents or two decimal points)
a. No, the stock is not a good value since it is only worth about $8.
b. No, the stock is not a good value since it is only worth about $12.
c. Yes, the stock is a good value since it should sell for about $25.
d. Yes, the stock is a good value since it should sell for about $18.
ANSWER: b
Find the RRR:
RRR = 1.75 + (1.7 × 5.25) = 10.68%
Now, find the stock’s future value:

D1 = .60 × 1.15 = .69
D2 = .69 × 1.15 = .79
D3 = .79 × 1.15 = .91
.95
DL = .91 × 1.04 = = $14.22
.1068 − .04
Third, find the stock’s present value:

N=1 N=2 N=3 N=3
I = 10.68 I = 10.68 I = 10.68 I = 10.68
FV = .69 FV = .79 FV = .91 FV =
PV = $.62 PV = .64 PV = .67 PV 14.22
= 10.49
.62 + .64 + .67 + 10.12 = $12.42 Actual value of the stock.
$16 > $12.42 = Based on the information given the stock is overvalued and should not be
bought
103. List the various rights of common stockholders.
ANSWER: 1. Dividend rights - they share equally on a per-share basis in any distribution of corporate
earnings.
2. Asset rights - in liquidation, they have the right to assets that remain after senior obligations
have been satisfied.
3. Preemptive rights - they have the right to share proportionately in any new stock sold.
4. Voting rights - they have the right to vote on stockholder maters such as the selection of the
board of directors.
104. What are the advantages and disadvantages of common stock financing?
ANSWER: Advantages:
1. There is no fixed-dividend obligation.
2. Common stock is less risky to the firm than fixed-income securities.
3. Are not restricted by restrictive covenants.
4. Common stock can lower the firm’s weighted cost of capital.
Disadvantages:
1. From the investor’s perspective, common stock is riskier than preferred stock or debt and
may have a higher required rate of return.
2. It frequently results in an initial dilution of per-share earnings.
3. It involves relatively high issuance costs (flotation costs) when sold to the public.
105. List the responsibilities of investment bankers.
ANSWER: Investment bankers are an important source of financial market expertise and an important part of
the security offering process.
They are involved in:
1. Long-range financial planning
2. The timing of security issues
3. The purchase of securities
4. The marketing of securities
5. The arrangement of private loans and leases
6. The negotiation of mergers
106. What are some of the costs associated with new security offerings?
ANSWER: 1. There are direct costs called an underwriting spread or underwriting discount.
2. There is a cost of management time in preparing the offering.
3. There is the cost of underpricing which occurs because the new security is priced below the
current or correct market price. This is due to the riskiness of the new security.
4. The cost of stock price declines for stock offerings by firms whose shares are already
outstanding.
5. The cost of other incentives provided to the investment banker. This includes the overallotment
or “Green Shoe” option. The option gives the investment banker the right to buy up to 15% of
the new offering at a price equal to the offering price. This option normally lasts for 30 days.
107. Why do closely held firms need to have an outside appraiser to determine their value? What are the reasons
for valuation?
ANSWER: In general a corporation’s value is determined by the marketability of its stock and its price as
listed on an exchange. An active market for closely held firms normally does not exist. This
necessitates using an independent appraiser to determine its value. A firm needs to know its
current value for:
1. mergers and acquisitions, divestitures and liquidation
2. initial public offerings
3. estate and gift tax returns
4. leveraged buyouts
5. recapitalizations
6. employee stock ownership plans
7. divorce settlements
8. estate valuation
9. litigation
108. What are the disadvantages of owning minority interest in a closely held corporation and how can this be
overcome?
ANSWER: A minority interest investment in a closely held corporation has an investment that:
1. lacks control
2. may lack marketability
3. generally receives little, if any, dividend
Minority interest shares should be discounted. A discount is applied to the per-share value which
ranges form 6% to more than 50%.
109. When Facebook launched its IPO, the sale of the stock did not go as planned. In fact, class action lawsuits
have been filed. What is the accusation against Facebook?
ANSWER: The lawsuits cite improprieties on the part of the company executives and its investment bankers.
The lawsuits cited the failure to disclose publicly lower growth forecasts for the company in the
weeks leading up to the IPO and the selective leaking of these forecasts to favored clients of
Morgan Stanley.
110. All of the following statements about common stock are correct EXCEPT:
a. common stock is a variable income security.
b. common stock prices fluctuate more than bonds.
c. common stock is callable.
d. common stockholders have preemptive rights
ANSWER: c
111. Of the following common stock rights, which allows common stockholders to buy more shares of common
stock in order to retain their pro-rata share of ownership in the company?
a. asset rights
b. preemptive rights
c. dividend rights
d. voting rights
ANSWER: b
112. Stock splits are:

a. a sign that the company is in need of more financial capital
b. a sign that the company's stock price is too low.
c. a sign that the company wants to get its stock price to a more desirable trading level.
d. a sign that the company cannot pay its stock dividend.
ANSWER: c
113. If a company offers more than one class of stock, corporate governance experts feel that:
a. that this is more democratic since some shares are more expensive than others.
b. that this is preferable in order to provide a special class of nonvoting stock to executives.
c. super-voting power allows for the election of directors that benefit a specific class of stock.
d. decisions made by the dual class system is more advantageous for the average investor.
ANSWER: c
114. Which of the following statements about common stock voting is/are correct?
I. Majority voting typically prohibits a group of stockholders with a minority viewpoint from having any
representation on the board.
II. Cumulative voting allows each share of stock to represent as many votes as there are directors to be
elected.
a. Only statement I is correct
b. Only statement II is correct
c. Both statement I and statement II are correct
d. Neither statement I nor statement II is correct.
ANSWER: c
115. All of the following are reasons that companies hold treasury stock EXCEPT:
a. to comply with SEC regulations that a certain amount of company shares must be kept by the company.
b. disposition of excess cash
c. financial restructuring
d. future corporate needs
ANSWER: a
Another random document with
no related content on Scribd:
THE SURPRISE
CHAPTER XI
THE SURPRISE
A few days after this John McClure, as he was still called, set sail
for Europe, and in his place came a quiet young man of whom the
children saw little, as he did not take his meals with them. Since they
were to stay at the Dallas place till November, Mrs. Law thought it
was not worth while for the children to lose all that time from school,
but though Jerry was perfectly willing to go back to his old
classmates, Cassy begged that she might be sent to another school,
and really was quite naughty and rebellious when her mother first
spoke of her going back. But finally, seeing that the child actually
suffered at the thought, her mother decided that she might be sent to
another school not very much further away, and the little girl was
highly pleased to think that she would be known as Catherine Law
and not as Miss Oddity. Her old patched frock had before this been
thrown aside, and she was now able to appear as well-dressed as
her schoolmates, who were in general of a better class than those
who attended the school near Orchard Street, therefore Cassy felt
that matters had bettered in every direction.
She missed her uncle very much, but as time went on they heard
frequently from him, and he wrote that he hoped to be with them
again in November. Before he went away he had had many long
talks with his sister, and they had made many plans.
Just what these were Mrs. Law did not say, but Cassy knew some
of the things that her uncle had decided upon, and her imagination
saw long rows of greenhouses, and a garden in which all manner of
flowers grew. She also knew that her mother was very bright and
happy and that her uncle had said that his sister ought by rights to
have a share in his good fortune, and that he should consider the
half of it belonged to her. Cassy wondered where they would live, but
when she asked her mother about it she only smiled and shook her
head.
However, one day in the early part of November, Mrs. Law asked,
“How would you children like to take a little journey with me to-
morrow?”
“We’d like it ever so much,” they both exclaimed. “Where is it that
we are going, mother?”
“Shall I tell you or will you have a little surprise?”
“What do you say, Jerry? Shall we have it a surprise?” Cassy
asked.
Jerry thought it over.
“Is it much of a trip?” he inquired; “for if it is, I don’t think I could
keep wanting to know, very long, but if it’s short I could stand it, and I
think it would be fun not to know where we were going.”
“I think so, too,” agreed Cassy.
“It isn’t much of a trip,” Mrs. Law told them; “about an hour by
train.”
“I could stand that, I reckon,” said Jerry. “Couldn’t you, Cassy?”
“Yes, I think I could. Don’t you wonder where it is, Jerry?”
“’Course I do.”
“What are we going for? Can you tell us that much, mother?”
“Do you really want me to?”
Cassy looked at Jerry.
“You might tell us just a little bit, only enough to make it
interesting,” Jerry decided.
“Well, we are going to look at a house. You know we can’t stay
here forever.”
The children looked at each other with dancing eyes.
“I am wild to know more, but I’ll not ask,” said Cassy. “It is too
exciting for anything. Have we got to move before Uncle John comes
back?”
“No, I don’t think so, but we want to know where we are to go, and
I have heard of this place, so I am to go and look at it and then write
to your uncle about it.”
“Shall I wear my blue frock?” Cassy asked.
“Yes, and I am going to take you out this afternoon and get a new
jacket for you.”
“Oh, good! good! And you’ll wear your new suit and Jerry will wear
his. How nice we will all look. Oh, isn’t it fine to be able to get things
when you need them? Even if we’re not rich we can have ever so
much more than we used to. Are we going to be gone all day to-
morrow?”
“I can’t tell just how long.”
“Shall we take our lunch with us?”
“No, I don’t think that will be necessary, for if we need anything we
can get it after we get there.”
“Then it isn’t in the country,” said Cassy, a little disappointed. “But
think of our taking a real journey. ’Scuse me, mother, but I must go
and talk to Miss Morning-Glory about it, or I’ll ask too many
questions.”
“You’d better get ready to go out with me.”
Thus charged Cassy ran off to dress and they soon started out on
their shopping expedition. Then when a dark-blue jacket had been
selected, Mrs. Law said she must get two or three other things, so
Cassy skipped along very happily by her side. The experience of
going shopping was a rare one, and to see her mother with any
money to spend was such a pleasure that the child enjoyed her
afternoon hugely.
They started about nine o’clock the next morning upon their little
journey. After an hour’s ride, which was by no means a dull one to
the children, they left the train and found themselves at a small
station. Their feet had hardly touched the platform before they heard
a voice call,
“There they are!” And who should appear but Rock and Eleanor.
“Oh, you did come, didn’t you? We’ve been down here half an hour,”
exclaimed Eleanor. “We were so afraid we’d miss you.”
“Did you know we were coming? Is this where you live?” asked
Cassy, eagerly.
“Yes will answer both those questions,” Eleanor replied. “Come
right along; we’re going up in the stage; it passes the place where
you have to get out. Weren’t you surprised when your mother told
you where you were coming?”
“She didn’t tell us. We had the surprise when we got here.”
“Oh, what fun! Then you don’t know the rest, and I’ll not tell you.
This is the stage; climb in.”
They all took their places and the stage rattled up the long street.
Just where the houses were beginning to be quite far apart, at the
turn of a lane, Rock exclaimed: “Here we are! Tumble out, Jerry.” He
got out himself first and stood politely to see that Mrs. Law and the
two girls were safely helped down, then they turned into the lane and
Rock led the way, with Mrs. Law and Jerry, while the girls followed.
Cassy looked around her with observant eyes.
“I never knew the country was so lovely at this time of year,” she
said. “It doesn’t look bare and ugly at all, and Miss Morning-Glory
said it would.”
Eleanor laughed.
“You see Miss Morning-Glory didn’t know what she was talking
about. Do you see her often now?”
“Not very. If we come up here, I don’t believe she will come at all.”
Eleanor laughed again; this idea of Cassy’s friend, that was only
an imaginary being, always amused her very much.
“If she doesn’t like the country all the year around I think she’d
better not come,” she said.
“It is lovely,” repeated Cassy; “the trees are all purple ’way off
there, and some of them are dark red near by, and the grass looks
all sort of golden, and the sky is so blue, and off that way it is smoky
purple. I like it.”
“Now that we’re almost there I’m going to tell you that this is the
place we talked about, don’t you remember?” said Eleanor.
“Oh, is it? I am so glad. I wonder where the greenhouses will be.”
“The greenhouses? What greenhouses?” Eleanor looked
astonished.
“Oh, I forgot, you don’t know.”
Rock heard her, and speaking over his shoulder said: “The
greenhouses will have to be built, Cassy. There is room enough for
them, as you’ll see. Look right ahead through those trees and you
will see the cottage.”
“Come,” cried Eleanor, catching Cassy by the hand, “let’s get there
first.” They ran ahead through the crisp brown leaves and stood
panting on the porch, that porch of which they had talked, and to
which still clung the morning-glory vines now withered and dry, but
showing rustling seed pods.
Rock produced the key of the house and they all went in. Mrs. Law
looked around critically. A hall ran through the middle of the house,
and on each side were two rooms. Above stairs there were four
comfortable bedrooms and a small one over the hall; an unfinished
garret gave plenty of storeroom.
Rock watched Mrs. Law’s face. This place was his special
discovery, and he was very anxious that it should be appreciated. He
showed off the various good points with the air of one who has a
personal interest. The view from the windows, the advantage of a
porch both front and back, the dry cellar, the closets in each room; all
these things were pointed out and Mrs. Law declared that, so far as
she was concerned, the house would be all that one could wish
when certain repairs had been made.
“The only point,” she said, “is the land. If that suits John’s purpose
I am more than satisfied. I will describe it to him as nearly as
possible, and I hope he will make up his mind to come, but I rather
think he will want to see it himself first.”
Rock looked a little disappointed.
“I did hope you could get settled right off.”
“We couldn’t do that anyhow,” Mrs. Law told him, “for there are
repairs to be made. I think as long as the place has been standing
idle for some time, and as you say, there are no applicants, that very
likely we can get the refusal of it, and I know when John comes he
will lose no time in looking at it.”
This seemed the best that could be done and they started back
towards the town.
“You are coming to our house to lunch, you know,” said Eleanor. “It
isn’t very far to walk.”
“Oh, my dear,” expostulated Mrs. Law, “I couldn’t think of such a
thing.”
“Oh, but you see,” said Eleanor, with decision, “mamma expects
you. She would have come down to the train herself, but she
couldn’t; she had a caller on very particular business, but she will be
looking for us, and Bubbles is just wild to see Cassy, and I promised
May Garland that I would bring Cassy over there to see the baby and
the chickens and everything. Then Rock wants to show Jerry where
he will go to school, and, oh my, if you don’t stay what will we do?”
Mrs. Law had to smile at her look of distress, and Cassy looked up
at her mother pleadingly. She did so very much want to see all these
people and the things of which she had heard Eleanor talk so much.
“There comes mamma now,” cried Eleanor. “She has driven out to
meet us with the pony. Now, Mrs. Law, you can get in and drive back
with her, and we will walk.”
Cassy had heard of this wonderful Shetland pony, Eleanor’s
dearest possession, and she drew a long breath of pleasure. She
would dearly have liked to drive behind him herself, and as if reading
her thought, Eleanor said: “We will go for a little drive this afternoon,
you and Jerry and Rock and I. You will not have to go till the late
train, I know.”
Cassy bestowed a beaming smile upon her.
“I don’t believe Miss Morning-Glory will want to come,” she said
with conviction.
By the time they had reached the gate, Mrs. Law and Eleanor’s
mother had gone in and it was evidently settled that the visitors were
to remain till after lunch.
“And please say you will not go till the late train,” Eleanor begged
Mrs. Law. “We’ve got so much to do.”
“And it will not keep till another time, I suppose,” returned Mrs.
Law.
“Your Aunt Dora promised to come over this afternoon; she wants
to see Mrs. Law, and I think we can persuade these friends to stay,”
said Eleanor’s mother.
“You will stay, won’t you, mother?” begged both Cassy and Jerry.
“Please,” added Rock and Eleanor. And Mrs. Dallas smiling,
repeated, “Please.” So Mrs. Law declared herself more than
persuaded, and that matter was settled.
“Which shall we do first, go over to May Garland’s or to drive?”
Eleanor asked Cassy.
“I think you’d better take your drive first,” suggested her mother.
“The days are so short and you’d best be near home when it gets
dark.”
“All right, we will do that. You must come right back after lunch,
Rock,” called Eleanor, as the boy was about to go.
Just then a smiling little colored girl appeared at the door. She
rolled her eyes delightedly in Cassy’s direction as she announced,
“Lunch ready, Mis’ Dallas.”
Cassy knew that this must be Bubbles, and she smiled in return.
Bubbles was so overcome with pleasure that she ducked her head
and giggled as she disappeared.
“I think you’ve two of the nicest things in the world,” said Cassy, as
they went into the dining-room, “and they’re both black; a Bubbles
and a pony.”
Eleanor laughed.
“I don’t know what I should do without them. Bubbles says she is
going to live with me when I grow up, but she’s getting pretty big
now, and I am so afraid she will get married first and will go off and
leave me.”
After lunch Eleanor showed her guest her little bedroom and her
playhouse in the yard where she kept her dolls, her books and many
of her treasures, and Cassy thought that in all her life she had never
dreamed of such a favored child as Eleanor Dallas.
“Aren’t you ’most happy enough to fly?” she asked.
“Why?” said Eleanor.
“I would be, if I had all these things and this lovely place to live in
and a papa.”
Eleanor put her arm around her.
“You have an Uncle John, and he will be just like a papa, I know.”
Cassy agreed that it was indeed something to be thankful for, and
then Rock called them to say that Spice was getting impatient, and
when were they coming.
So off they set, the little pony’s short quick steps taking them along
at a good rate. The sparkling November air made them all as lively
as possible; Cassy alone was almost too happy for words, but the
others chattered without stopping, and at last, on their return to town,
they stopped at May Garland’s gate and the drive was over. The girls
went in and the two boys drove around to put Spice in the stable.
May Garland with her dog, her cats, her chickens, and last, but not
least, her sweet baby sister, Rosalie, was a very desirable
acquaintance, Cassy thought, and when Bubbles came flying in with
the message that they must come back at once as it was nearly train
time, Cassy thought she had never known so short an afternoon.
As May Garland lived in the next house to the Dallas’s they had
not far to go, and arrived to find Mrs. Law ready to start for the train.
“I hate to have you go,” said Eleanor at parting, “but I am going to
think you are coming back again soon; and oh, I do hope you will go
to our school, you nice, funny girl, and I am so very, very glad that
everybody is happy and that everything is happening so beautifully
for you.”
UNCLE JOHN ARRIVES
CHAPTER XII
UNCLE JOHN ARRIVES
The next great thing to look for was the return of Uncle John. He
was not one to waste his time, and he had been able to arrange his
affairs more quickly than Mrs. Law had dared to hope, for he wrote
that they might look for him the latter part of November, and Mrs.
Law busied herself in making her preparations to leave the Dallas
place.
There had been a sharp frost, which even the chrysanthemums
had not withstood, so the garden looked bare and dreary. The arbor
vitæ hedge alone kept its green, and as Cassy stood looking at the
wisps of straw which covered the rose-bushes, she told herself that
she really felt less sorry to leave than she had ever thought she
could. The prospect of that other garden near to Eleanor and to May
Garland, that cottage which overlooked a shining strip of river, and in
sight of which were the purple hills, all this made her feel that she
was to gain more than she was to lose.
“Although I am going away, I shall always love you very, very
much, you dear garden,” she whispered. “I will never forget you, and
you must take good care of my mouse and my spiders, and some
day I will come back and see you, roses, dear, when you come out of
your funny little straw houses. In a few days we shall all be gone and
I will be outside your brick wall, you dear garden.”
She walked slowly back to the house, though Jerry was calling:
“Hurry, hurry, Cassy.” Then it suddenly occurred to her that maybe
her Uncle John had come, and she ran very fast up the garden path
towards the house. Sure enough, that was why Jerry had called, for
before she had reached the porch steps she was caught up by a pair
of strong arms and her own clasped her uncle’s neck.
“I am so glad, so glad to see you, you dear, dearest uncle,” she
said.
“And I am glad to see my little lassie again. I was homesick for her
many a time, my little Cassy.”
“And you’ll never, never go back there again.”
“Not unless I take you with me. When you’re a young lady,
perhaps, we’ll all go over and have a look at things together.”
Cassy gave him a hug and he put her down.
There was much to talk about, so much to do and to see that for
the next week they seemed in a whirl. First there was a mysterious
package of presents which Uncle John had brought with him, and
which was found to contain a piece of soft wool material, a true
Scotch plaid, for a new frock for Cassy, and a new doll from London,
which Cassy admired very much, but which she played with only on
special occasions, for her beloved Flora was not to be cast aside for
any newcomer. For Jerry there was a suit of Scotch tweed and a little
silver watch, while for Mrs. Law there was a piece of silk for a new
gown and some other things, mementoes of her childhood, a bit of
heather, a pin in which was set a Scotch pebble, and a lot of
photographs of her old home and the surrounding country. These
last were a great source of pleasure to the children, especially to
Cassy, who sat and dreamed over them, imagining her mother a tiny
child with her sturdy little brother by her side playing in that home
over the sea.
The very next day after his arrival Uncle John went to look at the
place upon which they had all set their hearts.
“I can scarcely wait till he comes back, can you, mother?” said
Jerry.
“Don’t you want dreadfully to go there?” asked Cassy.
“Not dreadfully. I should be content anywhere, I think, with my dear
children and my brother; but for your sakes, my darlings, I’d like to
go.”
“Then I think we will,” said Cassy, “for Uncle John loves me very
much, and I told him I’d be dreadfully disappointed if he didn’t like
the place.”
Her mother laughed.
“I think then he’ll try very hard to like it.”
“Isn’t it funny when he went away he was John McClure, and when
he came back he was John Kennedy; I like him best to be John
Kennedy, because he has a part of my name,” said Cassy.
She was right in supposing that her uncle would try to like the
place, and it is quite true also, that Rock’s eagerness and Cassy’s
desire in the matter had much to do with his decision. At all events
when he did return that evening, he told them that he had not only
bought the place, but that he had set the painters and carpenters to
work, and that he wanted his sister and Cassy to go down town with
him the next day to choose the papers for the walls, and that he
hoped in a couple of weeks they could move in.
“I’ve a deal of work to get done before spring,” he said, “and so I
can’t afford to lose any time, besides I have so set my heart on a
little home for us all that I am as impatient as the children.”
“I’m glad you are impatient,” said Cassy with satisfaction.
The choosing of the wall papers was a most bewildering and
fascinating work, and when Cassy saw a certain design of roses on
a cream ground she begged to have that for her room.
“And what am I to have?” asked her uncle.
Cassy gravely considered chrysanthemums and buttercups and
purple clematis.
“Which do you like best?” she asked.
“Yours,” he returned.
The shopman unrolled another paper, and Cassy gave a little
scream of delight.
“You can have the other,” she cried, for here were morning-glories,
delicately trailing up a creamy white paper; curling tendrils, heart
shaped leaves, and all, looked so very natural.
“I’ll agree,” said her uncle. “I will take the roses,” and so with
buttercups for Jerry and chrysanthemums for Mrs. Law they were all
satisfied.
Then came the buying of furniture, for Mrs. Law’s poor little stock
would go only a very little way towards being enough, and next there
were carpets and curtains and many other things, and finally there
came a day when Mrs. Law went up to the cottage with her brother
to set up the furniture which had been unpacked and stood ready to
be placed in the different rooms.
At last came the time when they were to leave the Dallas place to
take possession of their new home. Martha had been on hand for
several days getting Mrs. Dallas’s rooms all in order, uncovering the
furniture and pictures and getting out the ornaments; the
upholsterers had been at work putting up the curtains and putting
down the carpets and rugs so that the house, when they left it,
appeared very much as it did that day when Cassy had first seen it,
and was less familiar to her than it had been in its summer aspect.
Along the garden walks gusts of wind were sweeping the dry leaves
and it looked wintry and cold out there.
“I’d rather see our purple hills and the river than brick walls; we
have ever so much more view,” said Cassy, triumphantly.
“You are getting very top-lofty,” returned her mother. “I remember a
little girl who, not a year ago, thought it would be paradise to get
inside this place, and now she thinks it is rather contracted.”
“Oh, but I love it, too, though I like my own home better.” She sat
with folded hands looking very thoughtful after this. Her mother
watched her for a little while.
“A penny for your thoughts,” she said, gaily. She was often quite
gay and smiling these days, different from that quiet, patient, gentle
mother who had always smiled so sadly and who had to work so
hard for her children.
Cassy held out her hand.
“The penny, please,” she said. “I was thinking about Mrs. Boyle
and the parrot and Billy Miles and all those people, and I was
wondering whether I ought to go and say good-bye to them.”
“Do you want to?”
“Not exactly. I do for some reasons.”
“What reasons?” Her mother looked at her with a half smile.
“I believe you know, mother.” She hung her head. “I would like
them to know we are going to have our own lovely little home, and I
would like to show off before the girls a little.”
“That’s what I was afraid of. It is perfectly natural that you should
feel so, but after all I think I wouldn’t do it. Jerry has let the boys
know of all the pleasant things that have happened and I think we
need not do any more.”
“I think after all I’m rather glad not to. I never, never want to see
that back yard again; do you?”
“No, my dear, no.”
Cassy’s Uncle John had already gone up to take possession of the
new home and was there to welcome them when they arrived. He
had bought a comfortable dayton and a pair of strong horses and
was at the station to meet them. Cassy’s heart beat so fast and she
was so overcome when they came within sight of the house that she
slipped down on the floor of the dayton and buried her face in her
mother’s lap. Mrs. Law laid her hand gently on the child’s. She
understood the excitable, intense nature.
John Kennedy, looking over his shoulder at the back seat, missed
his little niece.
“Where’s Cassy?” he asked.
She lifted her head and he saw her trembling lips and moist eyes.
“Not crying, Cassy?” he said.
“I’m not crying because I am sorry, Uncle John, but I’m so glad I
can’t help it.”
As they stopped before the gate, after turning in from the long
lane, there came a shout and a hallo, and around the corner of the
house came Rock, Eleanor, May Garland and Bubbles, all capering
about in delight and calling out a dozen things before the newcomers
had left their places. Jerry was the first to scramble down. He viewed
the house now spick and span in its new coat of paint.
“My, doesn’t it look fine?” he cried. And he made a rush for the
porch.
“May and I were coming down for you in the pony carriage, but we
thought maybe you’d rather ride up in your uncle’s new dayton,”
Eleanor said to Cassy, who hadn’t a word to say. She only looked
from one to the other smiling. “We haven’t been all over the house
yet,” Eleanor went on to say. “Your uncle said you would like to show
it to us yourself. Isn’t it funny that we’ve got to learn to call him Mr.
Kennedy?”
They all went in and Cassy led them from room to room. It was all
neat and comfortable with no attempt at show, but very cheerful and
homelike, “just as a cottage should be,” Mrs. Law had said.
When the house was fully viewed and they had peeped into all the
closets and corners, Eleanor gave Rock a look and he said, “We’ve
got something to show you out in the stable. Just wait a minute, you
and Jerry, and then come out there. You needn’t wait but five
minutes.” Then the four visitors ran out, leaving Jerry and Cassy to
wonder what was coming next.
They were so happy over all these delightful new things that as
soon as the other children disappeared they hugged each other and
danced up and down repeating in a singsong: “We’ve got a new
home! We’ve got a new home!” for the want of something better to
do and finding no other way to give vent to their feelings.
“It’s five minutes,” said Jerry, looking at his new watch. “Come on,”
and they ran out to the stable, but, before they reached it, out came
Rock bearing a Skye-terrier puppy in his arms. It was as much as
possible like Ragged Robin and about the size he was when Jerry
rescued him.
“It’s for you, old fellow,” said Rock, and then, boy-like, he turned
away before Jerry could say a word of thanks.
After Rock came Eleanor carrying in her arms a dear little kitten
with the bluest eyes and with soft gray fur. She gave it carefully into
Cassy’s arms.
“Miss Morning-Glory told me that she thought you would like to
have a kitty,” she said, laughing.
Then came May Garland, a little shy, but with eyes full of laughter.
She had a basket in her hand.
“You can’t hold this, too,” she said, “but you see it is a little hen.”
She opened the basket and Cassy laughed as the buff hen cocked
her head to one side and made the remark: “Caw; caw!”
Not to be outdone by the others, Bubbles, chuckling and trying to
swallow her laugh, held a small box in her hand. There was a
scrambling and a scurrying inside. Cassy wondered what it could be.
“Miss Dimple say you lak mouses,” said Bubbles, “and I fetch yuh
dis one.”
Cassy put her kitten into Eleanor’s arms.
“Hold it for me,” she said, “and don’t let it go.” She took the box,
but too late heeded Bubbles’ warning. “Take keer!” for Miss Mouse
giving a sudden spring lifted the lid of the box as Cassy was
preparing to peep in, and leaping out scurried away out of sight as
fast as she could go.
“Oh!” exclaimed Cassy dismayed and hardly aware of what had
happened. But Bubbles threw up her hands and brought them
together with a shout of delight. It was just the kind of sensation that
she enjoyed.
“Ne’min’, Miss Cassy,” she said. “I reckons hit’s a good thing fo’
Miss Mouse she git away, fur de kitten mought git her.”
“Let’s make a house for the hen,” said Rock to Jerry who had
followed up Rock and now had returned to see what all this fun was
about.
“All right,” said Jerry, glad for some excuse to exercise his
energies. “I’m going to keep the puppy right with me all the time. I tell
you, he is a dandy. I am awfully glad to have him.”
“You’ll call him Ragged Robin, won’t you?”
“Yes, but I’ll call him Robin for short.”
The boys went into the stable to find something for the hen-coop,
and the girls went to the house. They found a pleasant-looking, rosy-
cheeked maid installed in the kitchen, and passing through they went
on up to Cassy’s morning-glory room. But by the time the boys had
settled the hen in her new home it was growing late and the visitors
took their leave with many friendly good-byes and neighborly
invitations. Cassy watched them depart and then went to her mother.
Out of doors Jerry and his uncle were looking over the land on
which would soon appear the rows of greenhouses. A shining line of
silver showed through the trees, telling where the river was. Behind
the purple hills the sun had set, and there was a gorgeous western
sky. With her head on her mother’s shoulder Cassy watched the
clouds of amethyst and gold and red.
“The sun has walked through his garden,” she said. “See all the
bunches of flowers in the sky. Aren’t you so happy it most hurts you,
mother?”
“I am very thankful and content,” she said.
“Monday morning Eleanor is going to call for me to take me to
school; she is coming with her pony carriage. Isn’t it good of Uncle
John to want me to go to that school? I must go and tell him. Kiss
me, mother, I am going to find Uncle John.”
Her mother kissed her and presently saw her stepping carefully
over the clods of earth, her face aglow with the rosy light from the
sky. She was singing in a shrill little voice: “Home sweet home.” Jerry
had forsaken his uncle and had gone to his beloved puppy, but
Uncle John heard Cassy and held out his hand. She went to him and
together they watched the daylight fade.
“But there’s such a beautiful to-morrow coming,” said Cassy, as
they walked towards the cottage in the waning light.

Ebook Contemporary Financial Management 13Th Edition Moyer Test Bank Full Chapter PDF

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Ebook Contemporary Financial Management 13Th Edition Moyer Test Bank Full Chapter PDF

Uploaded by

Copyright:

Available Formats

Contemporary Financial Management

13th Edition Moyer Test Bank

2. Stockholders' equity includes all of the following except:

4. The market value of common stock is primarily based on

6. The book value of an asset represents

7. In a reverse stock split

8. Which of the following is not an advantage of common stock financing?

14. Many preferred stocks are treated as in determining their values.

18. Stockholders’ equity equals

19. A common stock’s book value is calculated

Common stock; $1 par value; authorized, 3,000,000 shares; issued and

27. If competition in an industry increases, the future growth potential should

31. result in what is known as treasury stock.

33. A firm may use a stock repurchase .

41. Direct issuance costs are

47. The P/E ratio indicates

48. Common stock dividends normally are paid

$1.10(1 + g ) so g = 0.126 or 12.6%

91. The zero growth method is used to value

94. The returns from most common stocks are

Find the next dividend D1:

Now, find the stock’s future value:

Third, find the stock’s present value:

103. List the various rights of common stockholders.

105. List the responsibilities of investment bankers.

112. Stock splits are:

You might also like