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Exam 7: Equity Markets and Stock Valuation

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Question 21

Multiple Choice

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For the past six years, the price of Slippery Rock stock has been increasing at a rate of 8.21 percent a year. Currently, the stock is priced at $43.40 a share and has a required return of 11.65 percent. What is the dividend yield?

A) 3.20 percent
B) 2.75 percent
C) 3.69 percent
D) 4.28 percent
E) 3.44 percent

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

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Question 22

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The required return on Mountain Brook stock is 13.8 percent and the dividend growth rate is 3.64 percent. The stock is currently selling for $32.80 a share. What is the dividend yield?

A) 10.16 percent
B) 8.93 percent
C) 11.75 percent
D) 10.50 percent
E) 13.36 percent

F) A) and E)
G) D) and E)

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Question 23

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The common stock of Sweet Treats has a total return of 11.62 percent, a stock price of $48.20, and recently paid an annual dividend of $2.38. What is the capital gains rate if the company maintains a constant dividend?

Horseshoe Stables is losing significant market share and thus its managers have decided to decrease the firm's annual dividend. The last annual dividend was $.86 a share but all future dividends will be decreased by 3.5 percent annually. What is a share of this stock worth today at a required return of 17.8 percent?

Newly issued securities are sold to investors in which one of the following markets?

The required return on a stock is equal to which one of the following if the dividend on the stock decreases by a constant percent per year?

Any person who owns a license to trade on the NYSE is called a:

Gamma Corp. is expected to pay the following dividends over the next four years: $7.50, $8.25, $15, and $1.80. Afterward, the company pledges to maintain a constant 4 percent growth rate in dividends, forever. If the required return is 14 percent, what is the current share price?

Companies can list their stock on which one of the following without having to meet listing requirements or filing financial statements with the SEC?

A firm has four open positions on its board of directors. How many shares do you need to own to guarantee your own election to the board if the firm has 387,500 shares of stock outstanding and uses cumulative voting? Each share is granted one vote.

Inside quotes are defined as the:

A DMM is a(n) :

Dry Dock Marina is expected to pay an annual dividend of $1.58 next year. The stock is selling for $18.53 a share and has a total return of 9.48 percent. What is the dividend growth rate?

Toy Mart recently announced that it will pay annual dividends at the end of the next two years of $1.60 and $1.10 per share, respectively. Then, in Year 5 it plans to pay a final dividend of $13.50 a share before closing its doors Permanently. At a required return of 13.5 percent, what should this stock sell for today?

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 that level through Year 3, 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?

Lamey Gardens has a dividend growth rate of 5.6 percent, a market price of $13.16 a share, and a required return of 14 percent. What is the amount of the last dividend this company paid?

If a trade is made "in the crowd," the trade has occurred:

The next dividend payment by S&S will be $1.38 per share. The dividends are anticipated to maintain a 2.5 percent growth rate, forever. If the stock currently sells for $26.90 per share, what is the required return?

There are two open seats on the board of directors. If two separate votes occur to elect the new directors, the firm is using a type of voting that is best described as _____ voting.

The Impulse Shopper recently paid an annual dividend of $1.13 per share. The company just announced that it is suspending all dividend payments on its common stock for the next five years. After that, the company expects to pay $.50 a share at the end of each year. At a required return of 18 percent, what is this stock worth today?