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The capital gains yield equals which one of the following?


A) Total yield
B) Current discount rate
C) Market rate of return
D) Dividend yield
E) Dividend growth rate

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

Correct Answer

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Donuts Delite just paid an annual dividend of $1.10 a share. The firm expects to increase this dividend by 8 percent per year the following 3 years and then decrease the dividend growth to 2 percent annually thereafter. Which one of the following is the correct computation of the dividend for year 7?


A) Donuts Delite just paid an annual dividend of $1.10 a share. The firm expects to increase this dividend by 8 percent per year the following 3 years and then decrease the dividend growth to 2 percent annually thereafter. Which one of the following is the correct computation of the dividend for year 7? A) B) C) D) E)
B) Donuts Delite just paid an annual dividend of $1.10 a share. The firm expects to increase this dividend by 8 percent per year the following 3 years and then decrease the dividend growth to 2 percent annually thereafter. Which one of the following is the correct computation of the dividend for year 7? A) B) C) D) E)
C) Donuts Delite just paid an annual dividend of $1.10 a share. The firm expects to increase this dividend by 8 percent per year the following 3 years and then decrease the dividend growth to 2 percent annually thereafter. Which one of the following is the correct computation of the dividend for year 7? A) B) C) D) E)
D) Donuts Delite just paid an annual dividend of $1.10 a share. The firm expects to increase this dividend by 8 percent per year the following 3 years and then decrease the dividend growth to 2 percent annually thereafter. Which one of the following is the correct computation of the dividend for year 7? A) B) C) D) E)
E) Donuts Delite just paid an annual dividend of $1.10 a share. The firm expects to increase this dividend by 8 percent per year the following 3 years and then decrease the dividend growth to 2 percent annually thereafter. Which one of the following is the correct computation of the dividend for year 7? A) B) C) D) E)

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

Correct Answer

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Delphin's Marina is expected to pay an annual dividend of $0.58 next year. The stock is selling for $8.53 a share and has a total return of 12 percent. What is the dividend growth rate?


A) 3.82 percent
B) 4.03 percent
C) 4.28 percent
D) 5.20 percent
E) 5.49 percent

F) B) and E)
G) A) and B)

Correct Answer

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Dividends are best defined as:


A) cash payments to shareholders.
B) cash payments to either bondholders or shareholders.
C) cash or stock payments to shareholders.
D) cash or stock payments to either bondholders or shareholders.
E) distributions of stock to current shareholders.

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

Correct Answer

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The Pancake House pays a constant annual dividend of $1.25 per share. How much are you willing to pay for one share if you require a 15 percent rate of return?


A) $7.86
B) $8.33
C) $10.87
D) $11.04
E) $11.38

F) A) and B)
G) None of the above

Correct Answer

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The dividend growth model can be used to value the stock of firms which pay which type of dividends? I. constant annual dividend II) annual dividend with a constant increasing rate of growth III) annual dividend with a constant decreasing rate of growth IV) zero dividend


A) I only
B) II only
C) II and III only
D) I, II, and III only
E) I, II, III, and IV

F) D) and E)
G) B) and E)

Correct Answer

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Which one of the following must equal zero if a firm pays a constant annual dividend?


A) Dividend yield
B) Capital gains yield
C) Total return
D) Market value per share
E) Book value per share

F) C) and E)
G) B) and C)

Correct Answer

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The Border Crossing just paid an annual dividend of $4.20 per share and is expected to pay annual dividends of $4.40 and $4.50 per share the next two years, respectively. After that, the firm expects to maintain a constant dividend growth rate of 2 percent per year. What is the value of this stock today if the required return is 14 percent?


A) $30.04
B) $32.18
C) $33.33
D) $35.80
E) $36.75

F) D) and E)
G) B) and E)

Correct Answer

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The required return on Mountain Meadow stock is 14 percent and the dividend growth rate is 3.5 percent. The stock is currently selling for $11.80 a share. What is the dividend yield?


A) 7.50 percent
B) 8.00 percent
C) 9.75 percent
D) 10.50 percent
E) 12.50 percent

F) B) and E)
G) A) and E)

Correct Answer

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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) NASDAQ Capital Market
B) Over-the-Counter Bulletin Board
C) Pink sheets
D) NASDAQ Global Market
E) NYSE

F) A) and B)
G) B) and E)

Correct Answer

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The electronic system that transmits buy and sell orders directly to a specialist on the floor of the NYSE is called:


A) NASDAQ.
B) SuperDOT.
C) TICKER.
D) ECN.
E) ORDFLOW.

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

Correct Answer

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New Gadgets is growing at a very fast pace. As a result, the company expects to pay annual dividends of $0.55, 0.80, and $1.10 per share over the next three years, respectively. After that, the dividend is projected to increase by 5 percent annually. The last annual dividend the firm paid was $0.40 a share. What is the current value of this stock if the required return is 16 percent?


A) $8.50
B) $9.67
C) $10.46
D) $12.23
E) $12.49

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

Correct Answer

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Given the following partial stock quote, what is the amount of the next annual dividend if yesterday's closing price was $32.60? Given the following partial stock quote, what is the amount of the next annual dividend if yesterday's closing price was $32.60? A) $1.07 B) $1.11 C) $1.15 D) $1.19 E) $1.23


A) $1.07
B) $1.11
C) $1.15
D) $1.19
E) $1.23

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

Correct Answer

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Graphic Designs has 120,000 shares of cumulative preferred stock outstanding. Preferred shareholders are supposed to be paid $1.50 per quarter per share in dividends. However, the firm has encountered financial problems and has not paid any dividends for the past three quarters. How much will the firm have to pay per share of preferred next quarter if the firm also wishes to pay a common stock dividend?


A) $3.00
B) $4.50
C) $6.00
D) $7.50
E) $9.00

F) C) and D)
G) None of the above

Correct Answer

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Central Staircase is offering preferred stock which is commonly referred to as 10-10 stock. This stock will pay an annual dividend of $10 a share starting 10 years from now. What is this stock worth to you today if you desire a 16 percent rate of return?


A) $14.48
B) $16.43
C) $17.07
D) $17.84
E) $18.21

F) B) and D)
G) B) and E)

Correct Answer

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Gamma Corp. is expected to pay the following dividends over the next four years: $5, $12, $18, and $1.80. Afterwards, the company pledges to maintain a constant 4 percent growth rate in dividends, forever. If the required return on the stock is 14 percent, what is the current share price?


A) $37.92
B) $41.06
C) $43.18
D) $46.09
E) $49.31

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

Correct Answer

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The Chip Dip Co. has 15,500 shares of stock outstanding, grants one vote per share, and uses straight voting. How many shares must you control to guarantee that you will be elected to the firm's board of directors if there are three open seats?


A) 5,167 shares
B) 5,134 shares
C) 3,876 shares
D) 7,751 shares
E) 7,134 shares

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

Correct Answer

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Aardvark, Inc. pays a constant annual dividend. At the end of trading on Wednesday, the price of its stock was $28. At the end of trading on the following day, the stock price was $27. As a result of the decline in the stock's price, the dividend yield _____ while the capital gains yield _____.


A) remained constant; remained constant
B) increased; remained constant
C) increased; increased
D) decreased; remained constant
E) decreased; decreased

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

Correct Answer

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General Importers announced today that its next annual dividend will be $2.60 per share. After that dividend is paid, the company expects to encounter some financial difficulties and is going to suspend dividends for 5 years. Following the suspension period, the company expects to pay a constant annual dividend of $1.30 per share. What is the current value of this stock if the required return is 18 percent?


A) $3.01
B) $3.55
C) $3.89
D) $4.27
E) $4.88

F) All of the above
G) A) and D)

Correct Answer

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Keller Metals common stock is selling for $36 a share and has a dividend yield of 3.2 percent. What is the dividend amount?


A) $0.32
B) $1.15
C) $3.49
D) $11.25
E) $11.52

F) All of the above
G) A) and B)

Correct Answer

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