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Exam 8: Stock Valuation

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Question 1

Multiple Choice

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You are the sole shareholder of a small corporation.Presently,you wish to diversify your holdings and thus want to sell a portion of your shares but do not want to incur the costs associated with SEC filings.Which one of the following markets,if any,might be conducive to this sale?

A) NASDAQ
B) OTCBB
C) Pink Sheets
D) NYSE

E) B) and C)
F) None of the above

Correct Answer

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C

Question 2

Multiple Choice

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The next dividend payment by Hillside Markets will be $2.35 per share.The dividends are anticipated to maintain a 4.5 percent growth rate forever.The stock currently sells for $65 per share.What is the dividend yield?

A) 3.20 percent
B) 3.62 percent
C) 3.81 percent
D) 4.50 percent
E) 4.81 percent

F) A) and B)
G) A) and C)

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Question 3

Multiple Choice

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Electronics,Inc.common stock returned a nifty 23.5 percent rate of return last year.The dividend amount was $0.25 a share which equated to a dividend yield of 0.95 percent.What was the rate of price appreciation for the year?

Callander Enterprises stock is listed on NASDAQ.The firm is planning to issue some new equity shares for sale to the general public.This sale will occur in which one of the following markets?

Big Falls Tours just paid a dividend of $1.55 per share.The dividends are expected to grow at 30 percent for the next 8 years and then level off to a 6 percent growth rate indefinitely.What is the price of this stock today given a required return of 15 percent?

Answer this question based on the dividend growth model.If you expect the market rate of return to increase across the board on all equity securities,then you should also expect:

Which one of the following is computed by dividing next year's annual dividend by the current stock price?

The common stock of Textile Mills pays an annual dividend of $1.65 a share.The company has promised to maintain a constant dividend even though economic times are tough.How much are you willing to pay for one share of this stock if you want to earn a 12 percent annual return?

Roy's Welding Supplies common stock sells for $38 a share and pays an annual dividend that increases by 3 percent annually.The market rate of return on this stock is 8.20 percent.What is the amount of the last dividend paid?

Which one of the following statements related to the NYSE is correct?

Jen's Fashions is growing quickly.Dividends are expected to grow at a 19 percent rate for the next 3 years,with the growth rate falling off to a constant 8 percent thereafter.The required return is 12 percent and the company just paid a $3.80 annual dividend.What is the current share price?

The stream of customer orders coming in to the NYSE trading floor is called the:

Northern Gas recently paid a $2.80 annual dividend on its common stock.This dividend increases at an average rate of 3.8 percent per year.The stock is currently selling for $26.91 a share.What is the market rate of return?

National Warehousing just announced it is increasing its annual dividend to $1.18 next year and establishing a policy whereby the dividend will increase by 3.25 percent annually thereafter.How much will one share of this stock be worth 8 years from now if the required rate of return is 9.5 percent?

An ECN is best described as:

You are an accountant and have been analyzing the financial statements of Euro Place Markets,which is a foreign retailer.While the firm's financials are not prepared according to GAAP,you have still been able to understand the firm's accounting practices and feel that this firm has a bright future.On which one of the following U.S.markets,if any,might you be able to purchase shares in this firm?

Last year,Hansen Delivery paid an annual dividend of $3.20 per share.The company has been reducing the dividends by 10 percent annually.How much are you willing to pay to purchase stock in this company if your required rate of return is 13 percent?

A market maker who acts as a dealer in one or more securities on the floor of the NYSE is called a:

Which one of the following types of stock is defined by the fact that it receives no preferential treatment in respect to either dividends or bankruptcy proceedings?

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?