公司理财期末789选择题.doc

1.What is the name given to the model that computes the present value of a stock by dividing next years annual dividend amount by the difference between the discount rate and the rate of change in the annual dividend amount?A.Stock pricing modelB.Equity pricing modelC.Capital gain modelD.Dividend growth modelE.Present value modelRefer to section 7.1.Blooms: KnowledgeDifficulty: BasicLearning Objective: 07-01 Assess how stock prices depend on future dividends and dividend growth.Section: 7.1Topic: Dividend growth model2.The dividend yield is defined as:A.the current annual cash dividend divided by the current market price per share.B.the current annual cash dividend divided by the current book value per share.C.next years expected cash dividend divided by the current market price per share.D.next years expected cash dividend divided by the current book value per share.E.next years expected cash dividend divided by next years expected market price per share.Refer to section 7.1.Blooms: KnowledgeDifficulty: BasicLearning Objective: 07-01 Assess how stock prices depend on future dividends and dividend growth.Section: 7.1Topic: Dividend yield3.The capital gains yield equals which one of the following?A.Total yieldB.Current discount rateC.Market rate of returnD.Dividend yieldE.Dividend growth rateRefer to section 7.1.Blooms: KnowledgeDifficulty: BasicLearning Objective: 07-01 Assess how stock prices depend on future dividends and dividend growth.Section: 7.1Topic: Capital gains yield4.Which one of the following types of securities has no priority in a bankruptcy proceeding?A.Convertible bondB.Senior debtC.Common stockD.Preferred stockE.Straight bond24.Which one of the following will increase the current value of a stock?A.Decrease in the dividend growth rateB.Increase in the required returnC.Increase in the market rate of returnD.Decrease in the expected dividend for next yearE.Increase in the capital gains yieldReview section 7.1.Blooms: ComprehensionDifficulty: IntermediateLearning Objective: 07-01 Assess how stock prices depend on future dividends and dividend growth.Section: 7.1Topic: Stock valuation25.The price of a stock at year 4 can be expressed as:A.D0 / (R + G4).B.D0 (1 + R)5.C.D1 (1 + R)5.D.D4/(R-g).E.D5/(R-g).Refer to section 7.1.Blooms: KnowledgeDifficulty: BasicLearning Objective: 07-01 Assess how stock prices depend on future dividends and dividend growth.Section: 7.1Topic: Dividend growth model26.Delfinos expects to pay an annual dividend of $1.50 per share next year. What is the anticipated dividend for year 5 if the firm increases its dividend by 2 percent annually?A.$1.50 (1.02)1B.$1.50 (1.02)2C.$1.50 (1.02)3D.$1.50 (1.02)4E.$1.50 (1.02)5Refer to section 7.1.Blooms: ComprehensionDifficulty: BasicLearning Objective: 07-01 Assess how stock prices depend on future dividends and dividend growth.Section: 7.1Topic: Dividend growth27.The required return on a stock is equal to which one of the following if the dividend on the stock decreases by 1 percent per year?A.(P0/D1)-gB.(D1/P0)/gC.Dividend yield + capital gains yieldD.Dividend yield - capital gains yieldE.Dividend yield capital gains yieldRefer to section 7.1.Blooms: ComprehensionDifficulty: BasicLearning Objective: 07-01 Assess how stock prices depend on future dividends and dividend growth.Section: 7.1Topic: Required return28.Donuts Delite just paid an annual dividend of $1.10 a share. The firm expects to increase this dividend by 8 percent per year the following 3 years and then decrease the dividend growth to 2 percent annually thereafter. Which one of the following is the correct computation of the dividend for year 7?A.($1.10) (1.08 3) (1.02 4)B.($1.10) (1.08 3) (1.02 3)C.($1.10) (1.08)3 (1.02)4D.($1.10) (1.08)3 (1.02)3E.($1.10) (1.08)3 (1.02)2Refer to section 7.1.Blooms: ComprehensionDifficulty: BasicLearning Objective: 07-01 Assess how stock prices depend on future dividends and dividend growth.Section: 7.1Topic: Dividend growth29.Aardvark, Inc. pays a constant annual dividend. At the end of trading on Wednesday, the price of its stock was $28. At the end of trading on the following day, the stock price was $27. As a result of the decline in the stocks price, the dividend yield _ while the capital gains yield _.A.remained constant; remained constantB.increased; remained constantC.increased; increasedD.decreased; remained constantE.decreased; decreasedRefer to section 7.1.Blooms: ComprehensionDifficulty: BasicLearning Objective: 07-01 Assess how stock prices depend on future dividends and dividend growth.Section: 7.1Topic: Dividend and capital gain yield30.Which one of the following must equal zero if a firm pays a constant annual dividend?A.Dividend yieldB.Capital gains yieldC.Total returnD.Market value per shareE.Book value per shareRefer to section 7.1.Blooms: ComprehensionDifficulty: BasicLearning Objective: 07-01 Assess how stock prices depend on future dividends and dividend growth.Section: 7.1Topic: Capital gains yield31.The dividend growth model can be used to value the stock of firms which pay which type of dividends? I. constant annual dividendII. annual dividend with a constant increasing rate of growthIII. annual dividend with a constant decreasing rate of growthIV. zero dividendA.I onlyB.II onlyC.II and III onlyD.I, II, and III onlyE.I, II, III, and IVRefer to section 7.1.Blooms: ComprehensionDifficulty: BasicLearning Objective: 07-01 Assess how stock prices depend on future dividends and dividend growth.Section: 7.1Topic: Dividend growth model32.Kate owns a stock with a market price of $31 per share. This stock pays a constant annual dividend of $0.60 per share. If the price of the stock suddenly increases to $36 a share, you would expect the: I. dividend yield to increase.II. dividend yield to decrease.III. capital gains yield to increase.IV. capital gains yield to decrease.A.I onlyB.II onlyC.III onlyD.I and III onlyE.II and IV onlyRefer to section 7.1.Blooms: ComprehensionDifficulty: BasicLearning Objective: 07-01 Assess how stock prices depend on future dividends and dividend growth.Section: 7.1Topic: Dividend and capital gain yield33.Computing the present value of a growing perpetuity is most similar to computing the current value of which one of the following?A.Non-dividend-paying stockB.Stock with a constant dividendC.Stock with irregular dividendsD.Stock with a constant growth dividendE.Stock with growing dividends for a limited period of timeRefer to section 7.1.Blooms: ComprehensionDifficulty: BasicLearning Objective: 07-01 Assess how stock prices depend on future dividends and dividend growth.Section: 7.1Topic: Growing perpetuity34.Jensen Shipping has four open seats on its board of directors. How many shares will a shareholder need to control to ensure that his or her candidate is elected to the board given the fact that the firm uses straight voting? Assume one share equals one vote.A.20 percent of the shares plus one voteB.25 percent of the shares plus one voteC.1/3 of the shares plus one voteD.50 percent of the shares plus one voteE.51 percent of the shares plus one vote51.Keller Metals common stock is selling for $36 a share and has a dividend yield of 3.2 percent. What is the dividend amount?A.$0.32B.$1.15C.$3.49D.$11.25E.$11.52Dividend = 0.032 $36 = $1.15AACSB: AnalyticBlooms: AnalysisDifficulty: BasicLearning Objective: 07-01 Assess how stock prices depend on future dividends and dividend growth.Section: 7.1Topic: Dividend amount52.The Glass Ceiling paid an annual dividend of $2.20 per share last year. Management just announced that future dividends will increase by 2.8 percent annually. What is the amount of the expected dividend in year 5?A.$2.39B.$2.41C.$2.46D.$2.53E.$2.58D5 = $2.20 (1.028)5 = $2.53AACSB: AnalyticBlooms: AnalysisDifficulty: BasicLearning Objective: 07-01 Assess how stock prices depend on future dividends and dividend growth.Section: 7.1Topic: Dividend amount53.The Pancake House pays a constant annual dividend of $1.25 per share. How much are you willing to pay for one share if you require a 15 percent rate of return?A.$7.86B.$8.33C.$10.87D.$11.04E.$11.38P = $1.25/0.15 = $8.33AACSB: AnalyticBlooms: AnalysisDifficulty: BasicLearning Objective: 07-01 Assess how stock prices depend on future dividends and dividend growth.Section: 7.1Topic: Constant dividend54.Shoreline Foods pays a constant annual dividend of $1.60 a share and currently sells for $28.50 a share. What is the rate of return?A.4.56 percentB.5.39 percentC.5.61 percentD.6.63 percentE.6.91 percentR = $1.60/$28.50 = 5.61 percentAACSB: AnalyticBlooms: AnalysisDifficulty: BasicLearning Objective: 07-01 Assess how stock prices depend on future dividends and dividend growth.Section: 7.1Topic: Constant dividend55.The common stock of Green Garden Flowers is selling for $24 a share. The company pays a constant annual dividend and has a total return of 3.8 percent. What is the amount of the dividend?A.$0.38B.$0.76C.$0.91D.$1.38E.$1.54D = 0.038 $24 = $0.91AACSB: AnalyticBlooms: AnalysisDifficulty: BasicLearning Objective: 07-01 Assess how stock prices depend on future dividends and dividend growth.Section: 7.1Topic: Total return56.Healthy Foods just paid its annual dividend of $1.45 a share. The firm recently announced that all future dividends will be increased by 2.8 percent annually. What is one share of this stock worth to you if you require a 14 percent rate of return?A.$12.56B.$12.95C.$13.31D.$13.68E.$14.07P0 = ($1.45 1.028)/(0.14 - 0.028) = $13.31AACSB: AnalyticBlooms: AnalysisDifficulty: BasicLearning Objective: 07-01 Assess how stock prices depend on future dividends and dividend growth.Section: 7.1Topic: Dividend growth model57.Plastics, Inc. will pay an annual dividend of $1.85 next year. The company just announced that future dividends will be increasing by 2.25 percent annually. How much are you willing to pay for one share of this stock if you require a 16 percent return?A.$13.45B.$13.61C.$13.76D.$14.02E.$14.45P0 = $1.85/(0.16 - 0.0225) = $13.45AACSB: AnalyticBlooms: AnalysisDifficulty: BasicLearning Objective: 07-01 Assess how stock prices depend on future dividends and dividend growth.Section: 7.1Topic: Dividend growth model58.The Printing Company stock is selling for $32.60 a share based on a 14 percent rate of return. What is the amount of the next annual dividend if the dividends are increasing by 2.5 percent annually?A.$3.48B.$3.52C.$3.57D.$3.66E.$3.75$32.60 (0.14 - 0.025) = $3.75AACSB: AnalyticBlooms: AnalysisDifficulty: BasicLearning Objective: 07-01 Assess how stock prices depend on future dividends and dividend growth.Section: 7.1Topic: Dividend growth model59.The common stock of Mid-Towne Movers is selling for $33 a share and has a 9 percent rate of return. The growth rate of the dividends is 1 percent annually. What is the amount of the next annual dividend?A.$2.58B.$2.61C.$2.64D.$2.67E.$2.70$33 (0.09 - 0.01) = $2.64AACSB: AnalyticBlooms: AnalysisDifficulty: BasicLearning Objective: 07-01 Assess how stock prices depend on future dividends and dividend growth.Section: 7.1Topic: Dividend growth model60.Delphins Marina is expected to pay an annual dividend of $0.58 next year. The stock is selling for $8.53 a share and has a total return of 12 percent. What is the dividend growth rate?A.3.82 percentB.4.03 percentC.4.28 percentD.5.20 percentE.5.49 percentg = 0.12 - ($0.58/$8.53) = 5.20 percentAACSB: AnalyticBlooms: AnalysisDifficulty: BasicLearning Objective: 07-01 Assess how stock prices depend on future dividends and dividend growth.Section: 7.1Topic: Dividend growth model61.Klaus Toys just paid its annual dividend of $1.40. The required return is 16 percent and the dividend growth rate is 2 percent. What is the expected value of this stock five years from now?A.$11.04B.$11.26C.$11.67D.$12.41E.$12.58P5 = $1.40 (1 + 0.02)6/(0.16 - 0.02) = $11.26AACSB: AnalyticBlooms: AnalysisDifficulty: BasicLearning Objective: 07-01 Assess how stock prices depend on future dividends and dividend growth.Section: 7.1Topic: Dividend growth model62.This morning, you purchased a stock that will pay an annual dividend of $1.90 per share next year. You require a 12 percent rate of return and the annual dividend increases at 3.5 percent annually. What will your capital gain be on this stock if you sell it three years from now?A.$2.43B.$2.51C.$2.63D.$2.87E.$2.92P0 = $1.90/(0.12 - 0.035) = $22.35P3 = $1.90 (1.035)3/(0.12 - 0.035) = $24.78Capital gain = $24.78 - $22.35 = $2.43AACSB: AnalyticBlooms: AnalysisDifficulty: IntermediateLearning Objective: 07-01 Assess how stock prices depend on future dividends and dividend growth.Section: 7.1Topic: Capital gain63.Blackwell Ink is losing significant market share and thus its managers have decided to decrease the firms annual dividend. The last annual dividend was $0.90 a share but all future dividends will be decreased by 5 percent annually. What is a share of this stock worth today at a required return of 15 percent?A.$4.07B.$4.28C.$4.49D.$4.72E.$4.95P0 = ($0.90 (1 - 0.05)/0.15 - (-0.05 = $4.28AACSB: AnalyticBlooms: AnalysisDifficulty: IntermediateLearning Objective: 07-01 Assess how stock prices depend on future dividends and dividend growth.Section: 7.1Topic: Dividend growth model64.Lamey Headstones increases its annual dividend by 1.5 percent annually. The stock sells for $28.40 a share at a required return of 14 percent. What is the amount of the last dividend this company paid?A.$3.50B.$3.55C.$3.60D.$3.65E.$3.70$28.40 = (D0 1.015)/(0.14 - 0.015); D0 = $3.50AACSB: AnalyticBlooms: AnalysisDifficulty: IntermediateLearning Objective: 07-01 Assess how stock prices depend on future dividends and dividend growth.Section: 7.1Topic: Dividend growth model65.The common stock of Tasty Treats is valued at $10.80 a share. The company increases its dividend by 8 percent annually and expects its next dividend to be $0.20 per share. What is the total rate of return on this stock?A.8.64 percentB.9.12 percentC.9.40 percentD.9.85 percentE.10.64 percentR = ($0.20/$10.80) + 0.08 = 9.85 percentAACSB: AnalyticBlooms: AnalysisDifficulty: BasicLearning Objective: 07-01 Assess how stock prices depend on future dividends and dividend growth.Section: 7.1Topic: Total return66.River Rock, Inc. just paid an annual dividend of $2.80. The company has increased its dividend by 2.5 percent a year for the past ten years and expects to continue doing so. What will a share of this stock be worth six years from now if the required return is 16 percent?A.$23.60B.$24.65C.$25.08D.$25.50E.$26.90P6 = ($2.80 1.0257)/(0.16 - 0.025) = $24.65AACSB: AnalyticBlooms: AnalysisDifficulty: BasicLearning Objective: 07-01 Assess how stock prices depend on future dividends and dividend growth.Section: 7.1Topic: Dividend growth model67.The Cart Wheel plans to pay an annual dividend of $1.20 per share next year, $1.00 per share a year for the following two years, and then cease paying dividends altogether. How much is one share of this stock worth to you today if you require a 17 percent rate of return?A.$2.38B.$2.43C.$2.56D.$2.60E.$2.64P0 = ($1.20/1.171) + ($1/1.172) + ($1/1.173) = $2.38AACSB: AnalyticBlooms: AnalysisDifficulty: IntermediateLearning Objective: 07-01 Assess how stock prices depend on future dividends and dividend growth.Section: 7.1Topic: Irregular dividends68.Atlas Home Supply has paid a constant annual dividend of $2.40 a share for the past 15 years. Yesterday, the firm announced the dividend will increase next year by 10 percent and will stay at the level through year three, after which time the dividends will increase by 2 percent annually. The required return on this stock is 12 percent. What is the current value per share?A.$25.51B.$26.08C.$24.57D.$26.02E.$26.84P3 = ($2.40 1.10 1.02)/(0.12- 0.02) = $26.928P0 = ($2.40 1.10)/1.12 + ($2.40 1.1)/1.122 + ($2.40 1.1) + $26.928/1.123 = $25.51AACSB: AnalyticBlooms: AnalysisDifficulty: IntermediateLearning Objective: 07-01 Assess how stock prices depend on future dividends and dividend growth.Section: 7.1Topic: Irregular growth69.Auto Transmissions is expected to pay annual dividends of $1.90 and $2.10 over the next two years, respectively. After that, the company expects to pay a constant dividend of $2.30 a share. What is the value of this stock at a required return of 15 percent?A.$13.67B.$14.21C.$14.83D.$15.08E.$15.60P2 = ($2.30/0.15) = $15.33P0 = $1.90/1.15 + ($2.10 + $15.33)/1.152 = $14.83AACSB: AnalyticBlooms: AnalysisDifficulty: IntermediateLearning Objective: 07-01 Assess how stock prices depend on fut