Stock Valuation

What is the market called that allows shareholders to resell their shares to other investors?

• Primary

• Proxy

• Secondary

• Inside

• Initial

The Pancake House pays a constant annual dividend of RM1.25 per share. How much are you willing to pay for one share if you require a 15 percent rate of return?

• RM7.86

• RM8.33

• RM10.87

• RM11.04

• RM11.38

Healthy Foods just paid its annual dividend of RM1.45 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?

• RM12.56

• RM12.95

• RM13.31

• RM13.68

• RM14.07

Plastics, Inc. will pay an annual dividend of RM1.85 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?

• RM13.45

• RM13.61

• RM13.76

• RM14.02

• RM14.45

Which statement about common stockholders is incorrect?

• Common stockholders have a residual claim on the firm’s cash flows.

• Common stockholders have first claim on the firm’s assets during bankruptcy

• Common stockholders have a voting right.

• Common stockholders are the ultimate owners of a corporation.

Assume that the dividend on Central Power Company's $3.25 preferred stock issue is paid annually at the end

of the year. Determine the price of this issue if its return is 12%.

• $3.25

• $39

• $12

• $27.08

Stock has growth rate 8%. just received an annual $3.24/share dividend per share. Required return is 15%

• $50

• $55

• $45

• no correct answer

Preferred stock is similar to a bond in the following way:

• Preferred stock always contains a maturity date.

• Both investments provide a stated income stream.

• Both contain a growth factor similar to common stock.

• Both provide interest payments.

Most preferred stocks have a feature that requires all past unpaid preferred dividend payments be paid before any common stock dividends can be paid. What is the name of this feature?

• participating

• cumulative

• provisional

• convertible

Stimpson Inc. preferred stock pays a $.50 annual dividend. What is the value of the stock if your required rate of return is 10%?

• $0.05

• $0.50

• $5.00

• $50.00