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Exam 8: Stock Valuation

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Question 21

Multiple Choice

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Roy's Welding common stock sells for $58.49 a share and pays an annual dividend that increases by 1.3 percent annually. The market rate of return on this stock is 12.6 percent. What is the amount of the last dividend paid?

A) $6.60
B) $5.86
C) $6.52
D) $6.98
E) $5.64

F) A) and E)
G) A) and B)

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Question 22

Multiple Choice

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A forward PE is based on:

A) the last four quarterly dividend payments.
B) the last dividend payment multiplied by 2.
C) historical earnings.
D) estimated future earnings.
E) industry averages.

F) B) and C)
G) C) and D)

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Question 23

Multiple Choice

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Crystal Glass recently paid $3.60 as an annual dividend. Future dividends are projected at $3.80, $4.10, and $4.25 over the next three years, respectively. Beginning four years from now, the dividend is expected to increase by 3.25 percent annually. What is one share of this stock worth today at a discount rate of 12.5 percent?

Hardy Lumber has a capital structure that includes bonds, preferred stock, and common stock. Which one of the following rights is most apt to be granted to the preferred shareholders?

JL Co. stock currently sells for $64 per share and the required return is 12 percent. The total return is evenly divided between the capital gains yield and the dividend yield. What is the current dividend per share if it's the company's policy to always maintain a constant growth rate in its dividends?

A company has four open seats on its board of directors. There are seven candidates vying for these four positions. There will be a single election to determine the winners. As the owner of 100 shares of stock, you will receive one vote per share for each open seat. You decide to cast all 400 of your votes for a single candidate. What is this type of voting called?

Currently, a firm has an EPS of $2.08 and a benchmark PE of 12.7. Earnings are expected to grow by 3.8 percent annually. What is the estimated current stock price?

An agent who maintains an inventory from which he or she buys and sells securities is called a:

An individual on the floor of the NYSE who owns a trading license and buys and sells for his or her personal account is called a:

You want to be on the board of directors of Uptown Communications. Since you are the only shareholder who will vote for you, you will need to own more than half of the outstanding shares of stock if you are to be elected to the board. What is the type of voting called that requires this level of stock ownership to be successfully elected?

Which one of following is the rate at which a stock's price is expected to appreciate?

The common stock of Dayton Repair sells for $47.92 a share. The stock is expected to pay $2.28 per share next year when the annual dividend is distributed. The company increases its dividends by 1.65 percent annually. What is the market rate of return on this stock?

A securities market primarily composed of dealers who buy and sell for their own inventories is referred to which type of market?

Who can access Level 3 of NASDAQ's information?

A decrease in which of the following will increase the current value of a stock according to the dividend growth model?

Sew 'N More just paid an annual dividend of $1.42 a share. The firm plans to pay annual dividends of $1.45, $1.50, and $1.53 over the next 3 years, respectively. After that time, the dividends will be held constant at $1.60 per share. What is this stock worth today at a discount rate of 11.7 percent?

Hi-Tek is a young start-up company that is currently retaining all of its earnings. The company plans to pay a $2 per share dividend in Year 7 and  increase that dividend by 2.2 percent per year thereafter. What is the current share price if the required return is 16 percent?

Jen owns 30 shares of stock in Delta Fashions and wants to win a seat on the board of directors. The firm has a total of 100 shares of stock outstanding. Each share receives one vote. Presently, the company is voting to elect three new directors. Which one of the following statements must be true given this information?

Which one of the following statements applies to NASDAQ?

The Uptowner will pay an annual dividend of $3.26 a share next year with future dividends increasing by 2.8 percent annually. What is the market rate of return if the stock is currently selling for $49.10 a share?