Question 1

Next year's annual dividend divided by the current stock price is called the:

Accepted Answer

C

Question 2

The rate at which a stock's price is expected to appreciate (or depreciate) is called the _____ yield.

Accepted Answer

D

Question 3

A stock listing contains the following information: P/E 17.5,closing price 33.10,dividend .80,YTD% chg 3.4,and net chg - .50. Which of the following statements are correct given this information?
I. The stock price has increased by 3.4% during the current year.
II. The closing price on the previous trading day was $32.60.
III. The earnings per share are approximately $1.89.
IV. The current yield is 17.5%.

Accepted Answer

B

Question 4

The constant dividend growth model is:

Accepted Answer

The answer of The constant dividend growth model is:
...

Question 5

A form of equity which receives no preferential treatment in either the payment of dividends or in bankruptcy distributions is called _____ stock.

Accepted Answer

The answer of A form of equity which receives no...

Question 6

Differential growth refers to a firm that increases its dividend by:

Accepted Answer

The answer of Differential growth refers to a firm that...

Question 7

The constant dividend growth model: I. assumes that dividends increase at a constant rate forever.
II) can be used to compute a stock price at any point of time.
III) states that the market price of a stock is only affected by the amount of the dividend.
IV) considers capital gains but ignores the dividend yield.

Accepted Answer

The answer of The constant dividend growth model: I. assumes...

Question 8

The discount rate in equity valuation is composed entirely of:

Accepted Answer

The answer of The discount rate in equity valuation is...

Question 9

Fred Flintlock wants to earn a total of 10% on his investments. He recently purchased shares of ABC stock at a price of $20 a share. The stock pays a $1 a year dividend. The price of ABC stock needs to _____ if Fred is to achieve his 10% rate of return.

Accepted Answer

The answer of Fred Flintlock wants to earn a total...

Question 10

The value of common stock today depends on:

Accepted Answer

The answer of The value of common stock today depends...

Question 11

The Robert Phillips Co. currently pays no dividend. The company is anticipating dividends of $0,$0,$0,$.10,$.20,and $.30 over the next 6 years,respectively. After that,the company anticipates increasing the dividend by 4% annually. The first step in computing the value of this stock today,is to compute the value of the stock when it reaches constant growth in year:

Accepted Answer

The answer of The Robert Phillips Co. currently pays no...

Question 12

The Scott Co. has a general dividend policy whereby it pays a constant annual dividend of $1 per share of common stock. The firm has 1,000 shares of stock outstanding. The company:

Accepted Answer

The answer of The Scott Co. has a general dividend...

Question 13

The underlying assumption of the dividend growth model is that a stock is worth:

Accepted Answer

The answer of The underlying assumption of the dividend growth...

Question 14

Payments made by a corporation to its shareholders,in the form of either cash,stock or payments in kind,are called:

Accepted Answer

The answer of Payments made by a corporation to its...

Question 15

Latcher's Inc. is a relatively new firm that is still in a period of rapid development. The company plans on retaining all of its earnings for the next six years. Seven years from now,the company projects paying an annual dividend of $.25 a share and then increasing that amount by 3% annually thereafter. To value this stock as of today,you would most likely determine the value of the stock _____ years from today before determining today's value.

Accepted Answer

The answer of Latcher's Inc. is a relatively new firm...

Question 16

The closing price of a stock is quoted at 22.87,with a P/E of 26 and a net change of 1.42. Based on this information,which one of the following statements is correct?

Accepted Answer

The answer of The closing price of a stock is...

Question 17

The stock valuation model that determines the current stock price by dividing the next annual dividend amount by the excess of the discount rate less the dividend growth rate is called the _____ model.

Accepted Answer

The answer of The stock valuation model that determines the...

Question 18

The net present value of a growth opportunity,NPVGO,can be defined as:

Accepted Answer

The answer of The net present value of a growth...

Question 19

Assume that you are using the dividend growth model to value stocks. If you expect the market rate of return to increase across the board on all equity securities,then you should also expect the:

Accepted Answer

The answer of Assume that you are using the dividend...

Question 20

The total rate of return earned on a stock is comprised of which two of the following?
I. current yield
II. yield to maturity
III. dividend yield
IV. capital gains yield

Accepted Answer

The answer of The total rate of return earned on...

Quiz 9: Stock Valuation