公司理財英文版題庫6

CHAPTER6

StockValuation

I.DEFINITIONS

GROWINGPERPETUITY

a1.Anassetcharacterizedbycashflowsthatincreaseata

constantrateforeveriscalleda:

a.growingperpetuity.

b.growingannuity.

c.commonannuity.

d.perpetuitydue.

e.preferredstock.

Difficultylevel:Easy

DIVIDENDGROWTHMODEL

b2.Thestockvaluationmodelthatdeterminesthecurrentstock

pricebydividingthenextannualdividendamountbythe

excessofthediscountratelessthedividendgrowthrateis

calledthe_____model.

a.zerogrowth

b.dividendgrowth

c.capitalpricing

d.earningscapitalization

e.discounteddividend

Difficultylevel:Easy

DIVIDENDYIELD

c3.Nextyear'sannualdividenddividedbythecurrentstock

priceiscalledthe:

a.yieldtomaturity.

b.totalyield.

c.dividendyield.

d.capitalgainsyield.

e.earningsyield.

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Difficultylevel:Easy

CAPITALGAINSYIELD

d4.Therateatwhichastock'spriceisexpectedtoappreciate

(ordepreciate)iscalledthe_____yield.

a.current

b.total

c.dividend

d.capitalgains

e.earnings

Difficultylevel:Easy

PREFERREDSTOCK

d5.Aformofequitywhichreceivespreferentialtreatmentinthe

paymentofdividendsiscalled_____stock.

a.dualclass

b.cumulative

c.deferred

d.preferred

e.common

Difficultylevel:Easy

PREFERREDSTOCK

e6.A_____isaformofequitysecuritythathasastated

liquidatingvalue.

a.bond

b.debenture

c.proxy

d.commonstock

e.preferredstock

Difficultylevel:Medium

COMMONSTOCK

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e

7.Aformofequitywhichreceivesnopreferentialtreatmentin

eitherthepaymentofdividendsorinbankruptcy

distributionsiscalled_____stock.

a.dualclass

b.cumulative

c.deferred

d.preferred

e.common

Difficultylevel:Easy

CUMULATIVEVOTING

b8.Thevotingprocedurewherebyshareholdersmaycastallof

theirvotesforonememberoftheboardiscalled_____voting.

a.democratic

b.cumulative

c.straight

d.deferred

e.proxy

Difficultylevel:Easy

STRAIGHTVOTING

c9.Thevotingprocedurewhereyoumustown50%plusoneof

theoutstandingsharesofstocktoguaranteethatyouwill

winaseatontheboardofdirectorsiscalled_____voting.

a.democratic

b.cumulative

c.straight

d.deferred

e.proxy

Difficultylevel:Easy

PROXYVOTING

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e

10.Thevotingprocedurewhereashareholdergrantsauthorityto

anotherindividualtovotehis/hersharesiscalled_____

voting.

a.democratic

b.cumulative

c.straight

d.deferred

e.proxy

Difficultylevel:Easy

PREEMPTIVERIGHTS

b11.Preemptiverightsrefertotherightofshareholdersto:

a.shareproportionatelyindividendspaid.

b.shareproportionatelyinanynewstockissuessold.

c.shareproportionatelyinliquidatedassets.

d.voteatannualshareholdermeetings.

e.overridethevotesofothershareholders.

Difficultylevel:Medium

DIVIDENDS

c12.Paymentsmadebyacorporationtoitsshareholders,inthe

formofeithercash,stockorpaymentsinkind,arecalled:

a.retainedearnings.

b.netincome.

c.dividends.

d.redistributions.

e.infusedequity.

Difficultylevel:Easy

PRIMARYMARKET

e13.Themarketinwhichnewsecuritiesareoriginallysoldto

investorsiscalledthe_____market.

a.dealer

b.auction

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c.over-the-counter

d.secondary

e.primary

Difficultylevel:Easy

SECONDARYMARKET

d14.Themarketinwhichpreviouslyissuedsecuritiesaretraded

amonginvestorsiscalledthe_____market.

a.dealer

b.auction

c.over-the-counter

d.secondary

e.primary

Difficultylevel:Easy

DEALER

e15.Anagentwhobuysandsellssecuritiesfrominventoryis

calleda:

a.broker.

b.trader.

c.capitalist.

d.principal.

e.dealer.

Difficultylevel:Easy

BROKER

a16.Anagentwhoarrangessecuritytransactionsamong

investorsiscalleda:

a.broker.

b.trader.

c.capitalist.

d.principal.

e.dealer.

Difficultylevel:Easy

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NYSEMEMBER

b17.TheownerofaseatontheNewYorkStockExchangeis

calleda(n)_____oftheexchange.

a.friend

b.member

c.agent

d.trustee

e.dealer

Difficultylevel:Easy

SPECIALIST

c18.AmemberoftheNewYorkStockExchangeactingasadealer

inoneormoresecuritiesontheexchangeflooriscalleda:

a.floortrader.

b.floorpost.

c.specialist.

d.floorbroker.

e.commissionbroker.

Difficultylevel:Easy

FLOORBROKER

d19.AmemberoftheNewYorkStockExchangewhoexecutes

ordersforcommissionbrokersonafeebasisisa:

a.floortrader.

b.dealer.

c.specialist.

d.floorbroker.

e.flooragent.

Difficultylevel:Easy

COMMISSIONBROKER

e20.AmemberoftheNewYorkStockExchangewhoexecutesbuy

andsellordersfromcustomersoncetransmittedtothe

exchangeflooriscalleda:

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a.

b.

c.

d.

e.

floortrader.

dealer.

specialist.

floorbroker.

commissionbroker.

Difficultylevel:Easy

FLOORTRADER

a21.AmemberoftheNewYorkStockExchangewhotradesfor

hisorherownaccount,tryingtoanticipatetemporaryprice

fluctuations,iscalleda(n):

a.floortrader.

b.exchangecustomer.

c.specialist.

d.floorbroker.

e.commissionbroker.

Difficultylevel:Easy

SUPERDOTSYSTEM

b22.TheelectronicsystemusedbytheNewYorkStockExchange

whichenablesorderstobetransmitteddirectlytoaspecialist

iscalledthe______system..

a.NASDAQ

b.SuperDOT

c.Instinet

d.Internet

e.brokerage.

Difficultylevel:Easy

ORDERFLOW

c23.The________hasamultiplemarketmakersystemrather

thanaspecialistsystem.

a.NYSE.

b.AMEX.

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c.NASDAQ.

d.NIKKEI

e.Noneoftheabove.

Difficultylevel:Easy

OVER-THE-COUNTERMARKET

c24.Asecuritiesmarketprimarilycomprisedofdealerswhobuy

andsellfortheirowninventoriesisgenerallyreferredtoas

a(n)______market.

a.auction

b.private

c.over-the-counter

d.regional

e.electronicnetwork

Difficultylevel:Easy

ECNs

d25.Electroniccommunicationsnetworks,orECNs,actto:

a.increaseliquidity.

b.increasecompetition.

c.increasethecosttoinvest.

d.A&B.

e.A&C.

Difficultylevel:Medium

II.CONCEPTS

VALUATIONOFZEROGROWTHSTOCK

c26.TheJamesRiverCo.paysanannualdividendof$1.50per

shareonitscommonstock.

Thisdividendamounthasbeenconstantforthepast15

yearsandisexpectedtoremain

constant.Giventhis,oneshareofJamesRiverCo.stock:

a.isbasicallyworthlessasitoffersnogrowthpotential.

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b.hasamarketvalueequaltothepresentvalueof$1.50paid

oneyearfromtoday.

c.isvaluedasifthedividendpaidisaperpetuity.

d.isvaluedwithanassumedgrowthrateof3%.

e.hasamarketvalueof$15.00.

Difficultylevel:Easy

VALUATIONOFZEROGROWTHSTOCK

e27.ThecommonstockoftheKenwithCo.paysaconstant

annualdividend.Thus,themarketpriceofKenwithstock

will:

a.alsoremainconstant.

b.increaseovertime.

c.decreaseovertime.

d.increasewhenthemarketrateofreturnincreases.

e.decreasewhenthemarketrateofreturnincreases.

Difficultylevel:Easy

DIVIDENDYIELDVS.CAPITALGAINSYIELD

c28.TheKosterCo.currentlypaysanannualdividendof$1.00

andplansonincreasingthatamountby5%eachyear.The

KeyserCo.currentlypaysanannualdividendof$1.00and

plansonincreasingtheirdividendby3%annually.Given

this,itcanbestatedwithcertaintythatthe_____ofthe

KosterCo.stockisgreaterthanthe_____oftheKeyserCo.

stock.

a.marketprice;marketprice

b.dividendyield;dividendyield

c.rateofcapitalgain;rateofcapitalgain

d.totalreturn;totalreturn

e.capitalgains;dividendyield

Difficultylevel:Medium

DIVIDENDGROWTHMODEL

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d29.Thedividendgrowthmodel:

I.assumesthatdividendsincreaseataconstantrateforever.

II.canbeusedtocomputeastockpriceatanypointoftime.

III.statesthatthemarketpriceofastockisonlyaffectedbythe

amountofthedividend.

IV.considerscapitalgainsbutignoresthedividendyield.

a.Ionly

b.IIonly

c.IIIandIVonly

d.IandIIonly

e.I,II,andIIIonly

Difficultylevel:Medium

DIVIDENDGROWTHMODEL

b30.Theunderlyingassumptionofthedividendgrowthmodelis

thatastockisworth:

a.thesameamounttoeveryinvestorregardlessoftheirdesired

rateofreturn.

b.thepresentvalueofthefutureincomewhichthestock

generates.

c.anamountcomputedasthenextannualdividenddividedby

themarketrateofreturn.

d.thesameamountasanyotherstockthatpaysthesame

currentdividendandhasthesamerequiredrateofreturn.

e.anamountcomputedasthenextannualdividenddividedby

therequiredrateofreturn.

Difficultylevel:Medium

DIVIDENDGROWTHMODEL

c31.Assumethatyouareusingthedividendgrowthmodelto

valuestocks.Ifyouexpectthemarketrateofreturnto

increaseacrosstheboardonallequitysecurities,thenyou

shouldalsoexpectthe:

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a.marketvaluesofallstockstoincrease,allelseconstant.

b.marketvaluesofallstockstoremainconstantasthe

dividendgrowthwilloffsetthe

increaseinthemarketrate.

c.marketvaluesofallstockstodecrease,allelseconstant.

d.stocksthatdonotpaydividendstodecreaseinpricewhile

thedividend-payingstocksmaintainaconstantprice.

e.dividendgrowthratestoincreasetooffsetthischange.

Difficultylevel:Medium

DIFFERENTIALGROWTH

c32.Latcher'sInc.isarelativelynewfirmthatisstillinaperiod

ofrapiddevelopment.The

companyplansonretainingallofitsearningsforthenextsix

years.Sevenyearsfrom

now,thecompanyprojectspayinganannualdividendof$.25

ashareandthen

increasingthatamountby3%annuallythereafter.Tovalue

thisstockasoftoday,youwouldmostlikelydeterminethe

valueofthestock_____yearsfromtodaybeforedetermining

today'svalue.

a.4

b.5

c.6

d.7

e.8

Difficultylevel:Medium

DIFFERENTIALGROWTH

d33.TheRobertPhillipsCo.currentlypaysnodividend.The

companyisanticipating

dividendsof$0,$0,$0,$.10,$.20,and$.30overthenext6

years,respectively.After

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a.

b.

c.

d.

e.

that,thecompanyanticipatesincreasingthedividendby4%

annually.Thefirststepincomputingthevalueofthisstock

today,istocomputethevalueofthestockwhenitreaches

constantgrowthinyear:

3.

4.

5.

6.

7.

Difficultylevel:Medium

DIFFERENTIALGROWTH

b34.Supernormalgrowthreferstoafirmthatincreasesits

dividendby:

a.threeormore%peryear.

b.aratewhichismostlikelynotsustainableoveranextended

periodoftime.

c.aconstantrateof2ormore%peryear.

d.$.10ormoreperyear.

e.anamountinexcessof$.10ayear.

Difficultylevel:Medium

DIVIDENDYIELDANDCAPITALGAINS

e35.Thetotalrateofreturnearnedonastockiscomprisedof

whichtwoofthefollowing?

I.currentyield

II.yieldtomaturity

III.dividendyield

IV.capitalgainsyield

a.IandIIonly

b.IandIVonly

c.IIandIIIonly

d.IIandIVonly

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e.IIIandIVonly

Difficultylevel:Medium

DIVIDENDYIELD

c36.Thetotalrateofreturnonastockcanbepositiveevenwhen

thepriceofthestockdepreciatesbecauseofthe:

a.capitalappreciation.

b.interestyield.

c.dividendyield.

d.supernormalgrowth.

e.realrateofreturn.

Difficultylevel:Medium

DIVIDENDYIELDANDCAPITALGAINS

c37.FredFlintlockwantstoearnatotalof10%onhis

investments.HerecentlypurchasedsharesofABCstockata

priceof$20ashare.Thestockpaysa$1ayeardividend.

ThepriceofABCstockneedsto_____ifFredistoachievehis

10%rateofreturn.

a.remainconstant

b.decreaseby5%

c.increaseby5%

d.increaseby10%

e.increaseby15%

Difficultylevel:Medium

DIVIDENDGROWTHMODEL

d38.Whichoneofthefollowingcorrectlydefinesthedividend

constantgrowthmodel?

a.P0=D0(R-g)

b.D=P0(R-g)

c.R=(P0D0)+g

d.R=(D1P0)+g

e.P0=(D1R)+g

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Difficultylevel:Medium

SHAREHOLDERRIGHTS

a39.Shareholdersgenerallyhavetherightto:

I.electthecorporatedirectors.

II.selecttheseniormanagementofthefirm.

III.electthechiefexecutiveofficer(CEO).

IV.electthechiefoperatingofficer(COO).

a.Ionly

b.IandIIIonly

c.IIonly

d.IandIIonly

e.IIIandIVonly

Difficultylevel:Medium

CUMULATIVEVOTING

c40.Jackowns35sharesofstockinBeta,Inc.andwantsto

exerciseasmuchcontrolaspossibleoverthecompany.Beta,

Inc.hasatotalof100sharesofstockoutstanding.Each

sharereceivesonevote.Presently,thecompanyisvotingto

electtwonewdirectors.Whichoneofthefollowing

statementsmustbetruegiventhisinformation?

a.Ifstraightvotingapplies,Jackisassuredoneseatonthe

board.

b.Ifstraightvotingapplies,Jackcancontrolbothopenseats.

c.Ifcumulativevotingapplies,Jackisassuredoneseatonthe

board.

d.Ifcumulativevotingapplies,Jackcancontrolbothopen

seats.

e.Regardlessofthetypeofvotingemployed,Jackdoesnotown

enoughsharestocontrolanyoftheseats.

Difficultylevel:Medium

STRAIGHTVOTING

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a

41.ABCCo.isownedbyagroupofshareholderswhoallvote

independentlyandwhoallwantpersonalcontroloverthe

firm.Ifstraightvotingisutilized,ashareholder:

a.musteitherownenoughsharestototallycontrolthe

electionsorelsehe/shehasnocontrolwhatsoever.

b.willbeabletoelectatleastonedirectoraslongasthereare

atleastthreeopenpositionsandtheshareholderownsat

least25%plusoneoftheoutstandingshares.

c.mustownatleasttwo-thirdsoftheshares,plusone,to

exercisecontrolovertheelections.

d.isonlypermittedtoelectonedirector,regardlessofthe

numberofsharesowned.

e.whoownsmoresharesthananyoneelse,regardlessofthe

numberofsharesowned,willcontroltheelections.

Difficultylevel:Medium

PROXYVOTING

e42.TheZiloCorp.has1,000shareholdersandispreparingto

electthreenewboardmembers.Youdonotownenough

sharestocontroltheelectionsbutaredeterminedtooustthe

currentleadership.Themostlikelyresultofthissituationis

a:

a.negotiatedsettlementwhereyouaregrantedcontroloverone

ofthethreeopenpositions.

b.legalbattleforcontrolofthefirmbasedonyourdiscontent

asanindividualshareholder.

c.arbitratedsettlementwherebyyouaregrantedcontrolover

oneofthethreeopenpositions.

d.totallossofpowerforyousinceyouareaminority

shareholder.

e.proxyfightforcontrolofthefirm.

Difficultylevel:Medium

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SHAREHOLDERRIGHTS

e43.Commonstockshareholdersaregenerallygrantedrights

whichincludetherightto:

I.shareincompanyprofits.

II.voteforcompanydirectors.

III.voteonproposedmergers.

IV.residualassetsinaliquidation.

a.IandIIonly

b.IIandIIIonly

c.IandIVonly

d.I,II,andIVonly

e.I,II,III,andIV

Difficultylevel:Medium

DIVIDENDS

e44.TheScottCo.hasageneraldividendpolicywherebytheypay

aconstantannualdividendof$1pershareofcommonstock.

Thefirmhas1,000sharesofstockoutstanding.The

company:

a.mustalwaysshowacurrentliabilityof$1,000fordividends

payable.

b.isobligatedtocontinuepaying$1pershareperyear.

c.willbedeclaredindefaultandcanfacebankruptcyiftheydo

notpay$1peryeartoeachshareholderonatimelybasis.

d.hasaliabilitywhichmustbepaidatalaterdateshouldthe

companymisspayinganannualdividendpayment.

e.muststilldeclareeachdividendbeforeitbecomesanactual

companyliability.

Difficultylevel:Medium

DIVIDENDS

b45.Thedividendspaidbyacorporation:

I.toanindividualbecometaxableincomeofthatindividual.

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II.reducethetaxableincomeofthecorporation.

III.aredeclaredbythechieffinancialofficerofthecorporation.

IV.toanothercorporationmayormaynotrepresenttaxable

incometotherecipient.

a.Ionly

b.IandIVonly

c.IIandIIIonly

d.I,II,andIVonly

e.I,III,andIVonly

Difficultylevel:Medium

PREFERREDSTOCK

a46.Theownerofpreferredstock:

a.isentitledtoadistributionofincomepriortothecommon

shareholders.

b.hastherighttovetotheoutcomeofanelectionheldbythe

commonshareholders.

c.hastherighttodeclarethecompanybankruptwhenever

thereareinsufficientfundsto

paydividendstothecommonshareholders.

d.receivestax-freedividendsiftheyareanindividualandown

morethan20%of

theoutstandingpreferredshares.

e.hastherighttocollectpaymentonanyunpaiddividendsas

longasthestockis

noncumulativepreferred.

Difficultylevel:Medium

PREFERREDSTOCK

b47.A6%preferredstockpays_____ayearindividendspershare.

a.$3

b.$6

c.$12

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d.$30

e.$60

Difficultylevel:Easy

PREFERREDSTOCK

e48.Whichoneofthefollowingstatementsconcerningpreferred

stockiscorrect?

a.Unpaidpreferreddividendsarealiabilityofthefirm.

b.Preferreddividendsmustbepaidquarterlyprovidedthefirm

hasnetincomethatexceedstheamountofthequarterly

dividend.

c.Preferreddividendsmustbepaidtimelyeachquarterorthe

unpaiddividendsstartaccruinginterest.

d.Allunpaiddividendsonpreferredstock,regardlessofthe

typeofpreferred,mustbepaidbeforeanyincomecanbe

distributedtocommonshareholders.

e.Preferredshareholdersmaybegrantedvotingrightsand

seatsontheboardifpreferreddividendpaymentsremain

unpaid.

Difficultylevel:Medium

PREFERREDSTOCK

e49.Inaliquidation,eachshareof5%preferredstockisgenerally

entitledtoaliquidationpaymentof_____aslongasthereare

sufficientfundsavailable.

a.$1

b.$5

c.$10

d.$50

e.$100

Difficultylevel:Medium

COMMONSTOCKVALUES

c50.Thevalueofcommonstocktodaydependson

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a.theexpectedfuture

b.theexpectedfuture

c.theexpectedfuture

rate.

d.theexpectedfuture

e.Noneoftheabove.

holdingperiodandthediscountrate.

dividendsandthecapitalgains.

dividends,capitalgainsandthediscount

holdingperiodandcapitalgains.

Difficultylevel:Medium

PRIMARYMARKET

d51.Whichoneofthefollowingtransactionsoccursintheprimary

market?

a.thesaleofABCstockbyFredJonestoMarySmith

b.thetax-freegiftofDEFstocktoHeatherbyJennifer

c.therepurchaseofGHIstockfromTimbyGHI

d.theinitialsaleofJKLstockbyJKLtoJamie

e.thetransferofMNOstockfromTomtohisson,Jon

Difficultylevel:Medium

DEALERSANDBROKERS

d52.Whichoneofthefollowingstatementsconcerningdealers

andbrokersiscorrect?

a.Adealerinmarketsecuritiesarrangessalesbetweenbuyers

andsellersforafee.

b.Adealerinmarketsecuritiespaystheaskedpricewhen

purchasingsecurities.

c.Abrokerinmarketsecuritiesearnsincomeintheformofa

bid-askspread.

d.Abrokerdoesnottakeownershipofthesecuritiesbeing

traded.

e.Abrokerdealssolelyintheprimarymarket.

Difficultylevel:Easy

PERPETUITYFORMULA

d53.TheformulaPo=DIV/rrepresents

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a.thepresentvalueofastreamofzerogrowthdividendsin

perpetuity.

b.thevalueofanogrowthdividendstream.

c.alowervaluethanifagrowthelementwasincluded.

d.Alloftheabove.

e.Noneoftheabove.

Difficultylevel:Easy

SPECIALIST'SPOST

b54.ThepostisastationarypositionontheflooroftheNewYork

StockExchangewherea_____isassignedtowork.

a.floortrader

b.specialist

c.dealer

d.floorbroker

e.commissionbroker

Difficultylevel:Medium

STOCKMARKETREPORTING

d55.Theclosingpriceofastockisquotedat22.87,withaP/Eof

26andanetchangeof

1.42.Basedonthisinformation,whichoneofthefollowing

statementsiscorrect?

a.Theclosingpriceonthepreviousdaywas$1.42higherthan

today'sclosingprice.

b.Adealerwillbuythestockat$22.87andsellitat$26a

share.

c.Thestockincreasedinvaluebetweenyesterday'scloseand

today'scloseby$.0142.

d.Theearningspershareareequalto1/26thof$22.87.

e.Theearningspersharehaveincreasedby$1.42thisyear.

Difficultylevel:Medium

STOCKQUOTE

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b56.Astocklistingcontainsthefollowinginformation:P/E17.5,

closingprice33.10,

dividend.80,YTD%chg3.4,andanetchgof-.50.Whichof

thefollowingstatements

arecorrectgiventhisinformation?

I.Thestockpricehasincreasedby3.4%duringthecurrent

year.

II.Theclosingpriceontheprevioustradingdaywas$32.60.

III.Theearningspershareareapproximately$1.89.

IV.Thecurrentyieldis17.5%.

a.IandIIonly

b.IandIIIonly

c.IIandIIIonly

d.IIIandIVonly

e.I,III,andIVonly

Difficultylevel:Medium

DISCOUNTRATE

b57.Thediscountrateinequityvaluationiscomposedentirelyof

a.thedividendspaidandthecapitalgainsyield.

b.thedividendyieldandthegrowthrate.

c.thedividendspaidandthegrowthrate.

d.thecapitalgainsearnedandthegrowthrate.

e.thecapitalgainsearnedandthedividendspaid.

Difficultylevel:Medium

NPVGO

b58.Thenetpresentvalueofagrowthopportunity,NPVGO,can

bedefinedas

a.thepresentvalueofaninvestmentinonenewproject.

b.thesteadygrowthindividendsfromcontinualre-investment

withpositiveNPV.

c.continualreinvestmentofearningswhenr<g.

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d.asingleperiodinvestmentwhenr>g.

e.Noneoftheabove.

Difficultylevel:Medium

III.PROBLEMS

STOCKVALUE-CONSTANTGROWTH

e59.Angelina'smadetwoannouncementsconcerningtheir

commonstocktoday.First,the

companyannouncedthattheirnextannualdividendhas

beensetat$2.16ashare.

Secondly,thecompanyannouncedthatallfuturedividends

willincreaseby4%

annually.Whatisthemaximumamountyoushouldpayto

purchaseashareof

Angelina'sstockifyourgoalistoearna10%rateofreturn?

a.$21.60

b.$22.46

c.$27.44

d.$34.62

e.$36.00

Difficultylevel:Easy

STOCKVALUE-CONSTANTGROWTH

d60.Howmuchareyouwillingtopayforoneshareofstockifthe

companyjustpaidan

$.80annualdividend,thedividendsincreaseby4%annually

andyourequirean

8%rateofreturn?

a.$19.23

b.$20.00

c.$20.40

d.$20.80

e.$21.63

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Difficultylevel:Easy

STOCKVALUE-CONSTANTGROWTH

d61.LeeHongImportspaida$1.00pershareannualdividend

lastweek.Dividendsare

expectedtoincreaseby5%annually.Whatisoneshareof

thisstockworthto

youtodayiftheappropriatediscountrateis14%?

a.$7.14

b.$7.50

c.$11.11

d.$11.67

e.$12.25

Difficultylevel:Easy

STOCKVALUE-CONSTANTGROWTH

c62.MajesticHomesstocktraditionallyprovidesan8%rateof

return.Thecompany

justpaida$2ayeardividendwhichisexpectedtoincrease

by5%peryear.If

youareplanningonbuying1,000sharesofthisstocknext

year,howmuchshouldyou

expecttopaypershareifthemarketrateofreturnforthis

typeofsecurityis9%

atthetimeofyourpurchase?

a.$48.60

b.$52.50

c.$55.13

d.$57.89

e.$70.00

Difficultylevel:Easy

STOCKVALUE-CONSTANTGROWTH

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c63.Leslie'sUniqueClothingStoresoffersacommonstockthat

paysanannualdividend

of$2.00ashare.Thecompanyhaspromisedtomaintaina

constantdividend.How

muchareyouwillingtopayforoneshareofthisstockifyou

wanttoearn12%

returnonyourequityinvestments?

a.$10.00

b.$13.33

c.$16.67

d.$18.88

e.$20.00

Difficultylevel:Easy

STOCKVALUE-DIFFERENTIALGROWTH

b64.Martin'sYachtshaspaidannualdividendsof$1.40,$1.75,

and$2.00ashareoverthe

pastthreeyears,respectively.Thecompanynowpredicts

thatitwillmaintaina

constantdividendsinceitsbusinesshasleveledoffandsales

areexpectedtoremain

relativelyconstant.Giventhelackoffuturegrowth,youwill

onlybuythisstockifyou

canearnatleasta15%rateofreturn.Whatisthemaximum

amountyouare

willingtopaytobuyoneshareofthisstocktoday?

a.$10.00

b.$13.33

c.$16.67

d.$18.88

e.$20.00

Difficultylevel:Medium

第109頁

REQUIREDRETURN

c65.ThecommonstockofEddie'sEngines,Inc.sellsfor$25.71

ashare.Thestockis

expectedtopay$1.80persharenextmonthwhenthe

annualdividendisdistributed.

Eddie'shasestablishedapatternofincreasingtheir

dividendsby4%annually

andexpectstocontinuedoingso.Whatisthemarketrateof

returnonthisstock?

a.7%

b.9%

c.11%

d.13%

e.15%

Difficultylevel:Medium

REQUIREDRETURN

a66.ThecurrentyieldonAlpha'scommonstockis4.8%.The

companyjustpaida

$2.10dividend.Therumoristhatthedividendwillbe$2.205

nextyear.Thedividend

growthrateisexpectedtoremainconstantatthecurrent

level.Whatistherequired

rateofreturnonAlpha'sstock?

a.10.04%

b.16.07%

c.21.88%

d.43.75%

e.45.94%

Difficultylevel:Medium

REQUIREDRETURN

第110頁

e67.Martha'sVineyardrecentlypaida$3.60annualdividend

ontheircommonstock.This

dividendincreasesatanaveragerateof3.5%peryear.The

stockiscurrently

sellingfor$62.10ashare.Whatisthemarketrateofreturn?

a.2.5%

b.3.5%

c.5.5%

d.6.0%

e.9.5%

Difficultylevel:Medium

REQUIREDRETURN

d68.Bet'RBiltBikesjustannouncedthattheirannualdividend

forthiscomingyearwillbe

$2.42ashareandthatallfuturedividendsareexpectedto

increaseby2.5%

annually.Whatisthe

marketrateofreturnifthisstockiscurrentlysellingfor$22a

share?

a.9.5%

b.11.0%

c.12.5%

d.13.5%

e.15.0%

Difficultylevel:Medium

DIVIDENDYIELDVS.CAPITALGAINSYIELD

b69.SharesofcommonstockoftheSamsonCo.offeranexpected

totalreturnof12%.Thedividendisincreasingataconstant

8%peryear.Thedividendyieldmustbe:

a.-4%.

b.4%.

c.8%.

第111頁

d.12%.

e.20%.

Difficultylevel:Medium

CAPITALGAIN

c70.ThecommonstockofGradyCo.returnedan11.25%rateof

returnlastyear.

Thedividendamountwas$.70asharewhichequatedtoa

dividendyieldof1.5%.Whatwastherateofprice

appreciationonthestock?

a.1.50%

b.8.00%

c.9.75%

d.11.25%

e.12.75%

Difficultylevel:Easy

DIVIDENDAMOUNT

b71.WeisbroandSonscommonstocksellsfor$21ashareand

paysanannualdividendthatincreasesby5%annually.The

marketrateofreturnonthisstockis9%.Whatisthe

amountofthelastdividendpaidbyWeisbroandSons?

a.$.77

b.$.80

c.$.84

d.$.87

e.$.88

Difficultylevel:Medium

DIVIDENDAMOUNT

d72.ThecommonstockofEnergizer'spaysanannual

dividendthatisexpectedtoi