Question 1

A stock is priced at $38.24 a share and has a market rate of return of 9.65 percent. What is the dividend growth rate if the company plans to pay an annual dividend of $.48 a share next year?

Accepted Answer

A)   7.42 percent
B)   8.39 percent
C)   2.23 percent
D)   7.60 percent
E)   1.26 percentF) B) and D)
G) A) and D)

Question 2

Delfino's expects to pay an annual dividend of $1.50 per share next year. What is the anticipated dividend for Year 5 if the firm increases its dividend by 2 percent annually?

Accepted Answer

A)   $1.50 ×(1.02) 1
B)   $1.50 ×(1.02) 2
C)   $1.50 ×(1.02) 3
D)   $1.50 ×(1.02) 4
E)   $1.50 ×(1.02) 5F) None of the above
G) A) and D)

Question 3

When valuing a stock using the constant-growth model, D1 represents the:

Accepted Answer

A)   expected difference in the stock price over the next year.
B)   expected stock price in one year.
C)   last annual dividend paid.
D)   the next expected annual dividend.
E)   discount rate.F) A) and B)
G) A) and E)

Question 4

Village East expects to pay an annual dividend of $1.40 per share next year, and $1.68 per share for the following two years. After that, the company plans to increase the dividend by 3.4 percent annually. What is this stock's current value at a discount rate of 13.7 percent?

Accepted Answer

A)   $14.09
B)   $17.28
C)   $15.15
D)   $16.08
E)   $18.18F) C) and D)
G) None of the above

Question 5

The NYSE:

Accepted Answer

A)   presently conducts all of its trading through SuperDOT.
B)   is a dealer market.
C)   is in the business of attracting order flow.
D)   is solely a primary market.
E)   is based on a multiple market maker system.F) B) and D)
G) None of the above

Question 6

Braxton's Cleaning Company stock is selling for $32.60 a share based on a rate of return of 13.8 percent. What is the amount of the next annual dividend if the dividends are increasing by 2.4 percent annually?

Accepted Answer

A)   $2.71
B)   $3.84
C)   $2.78
D)   $2.86
E)   $3.72F) C) and D)
G) A) and B)

Question 7

Blasco International has sales of $389,700 and costs of $413,210. The company has 120,000 shares outstanding. What is the price-sales ratio if the stock has a book value of $19.20 per share and a market value per share of $8.60?

Accepted Answer

A)   2.65
B)   1.89
C)   2.23
D)   2.48
E)   2.37F) B) and D)
G) B) and C)

Question 8

A stock has paid dividends of $1.70, $1.85, $2.00, $2.20, and $2.50 over the past five years, respectively. What is the average capital gains yield?

Accepted Answer

A)   8.86 percent
B)   3.24 percent
C)   9.45 percent
D)   5.34 percentG = [($1.85 - 1.70)  / $1.70 + ($2.00 - 1.85)  / $1.85 + ($2.20 - 2.00)  / $2.00 + ($2.50 - 2.20)  / $2.20] / 4 = .1014, or 10.14 percent
E)   10.14 percentF) A) and B)
G) C) and E)

Question 9

Hi-Lo has 160,000 shares outstanding priced at $33 a share. There will be three open positions on its board in the next election. Currently, you are not a shareholder but would like to become one and also gain a seat on the board. How much will it cost you to buy a seat if the company uses straight voting? What if the firm uses cumulative voting?

Accepted Answer

A)   -$2,640,033; $1,320,033
B)   $2,710,033; $1,760,033
C)   $2,710,033; $1,430,033
D)   $2,640,033; $1,320,033
E)   $2,640,033; $1,760,033F) B) and D)
G) A) and D)

Question 10

A person who executes customer orders to buy and sell securities on the floor of the NYSE is called a:

Accepted Answer

A)   supplemental liquidity provider (SLP) .
B)   designated market maker (DMM) .
C)   runner.
D)   Floor broker.
E)   market maker.F) B) and D)
G) B) and C)

Question 11

Gleason, Inc., elects its board of directors on a staggered basis using cumulative voting. This implies that:

Accepted Answer

A)   if there are two open seats, then the candidate with the highest number of votes and the candidate with the lowest number of votes will be selected.
B)   the candidates for the open seats are voted for in individual elections.
C)   all open positions are filled with one round of voting, assuming there are no tie votes.
D)   shareholders can accumulate their votes over multiple years and cast all those votes in one election.
E)   the firm's entire board of directors is elected annually in one combined election.F) B) and C)
G) None of the above

Exam 7: Equity Markets and Stock Valuation

Gleason, Inc., elects its board of directors on a staggered basis using cumulative voting. This implies that:

Correct Answer
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The NYSE:

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Delfino's expects to pay an annual dividend of $1.50 per share next year. What is the anticipated dividend for Year 5 if the firm increases its dividend by 2 percent annually?

Correct Answer
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Blasco International has sales of $389,700 and costs of $413,210. The company has 120,000 shares outstanding. What is the price-sales ratio if the stock has a book value of $19.20 per share and a market value per share of $8.60?

Correct Answer
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A stock has paid dividends of $1.70, $1.85, $2.00, $2.20, and $2.50 over the past five years, respectively. What is the average capital gains yield?

Correct Answer
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When valuing a stock using the constant-growth model, D1 represents the:

Correct Answer
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Village East expects to pay an annual dividend of $1.40 per share next year, and $1.68 per share for the following two years. After that, the company plans to increase the dividend by 3.4 percent annually. What is this stock's current value at a discount rate of 13.7 percent?

Correct Answer
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A stock is priced at $38.24 a share and has a market rate of return of 9.65 percent. What is the dividend growth rate if the company plans to pay an annual dividend of $.48 a share next year?

Correct Answer
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Braxton's Cleaning Company stock is selling for $32.60 a share based on a rate of return of 13.8 percent. What is the amount of the next annual dividend if the dividends are increasing by 2.4 percent annually?

Correct Answer
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A person who executes customer orders to buy and sell securities on the floor of the NYSE is called a:

Correct Answer
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Exam 7: Equity Markets and Stock Valuation

Gleason, Inc., elects its board of directors on a staggered basis using cumulative voting. This implies that:

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The NYSE:

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Delfino's expects to pay an annual dividend of $1.50 per share next year. What is the anticipated dividend for Year 5 if the firm increases its dividend by 2 percent annually?

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Blasco International has sales of $389,700 and costs of $413,210. The company has 120,000 shares outstanding. What is the price-sales ratio if the stock has a book value of $19.20 per share and a market value per share of $8.60?

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A stock has paid dividends of $1.70, $1.85, $2.00, $2.20, and $2.50 over the past five years, respectively. What is the average capital gains yield?

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When valuing a stock using the constant-growth model, D1 represents the:

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Village East expects to pay an annual dividend of $1.40 per share next year, and $1.68 per share for the following two years. After that, the company plans to increase the dividend by 3.4 percent annually. What is this stock's current value at a discount rate of 13.7 percent?

Correct AnswerverifiedShow Answer

A stock is priced at $38.24 a share and has a market rate of return of 9.65 percent. What is the dividend growth rate if the company plans to pay an annual dividend of $.48 a share next year?

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Braxton's Cleaning Company stock is selling for $32.60 a share based on a rate of return of 13.8 percent. What is the amount of the next annual dividend if the dividends are increasing by 2.4 percent annually?

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A person who executes customer orders to buy and sell securities on the floor of the NYSE is called a:

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