公司理财精要第七章题库Chapter 07 - Equity Markets and Stock ValuationChapter 07Equity Markets and Stock ValuationMultiple Choice Questions1. What is the name given to the model that computes the present value of a stock by dividing next year's annual dividend amount by the difference between the discount rate and the rate of change in the annual dividend amount?A. Stock pricing modelB. Equity pricing modelC. Capital gain modelD. Dividend growth modelE. Present value model2. The dividend yield is defined as:A. the current annual cash dividend divided by the current market price per share.B. the current annual cash dividend divided by the current book value per share.C. next year's expected cash dividend divided by the current market price per share.D. next year's expected cash dividend divided by the current book value per share.E. next year's expected cash dividend divided by next year's expected market price per share.3. The capital gains yield equals which one of the following?A. Total yieldB. Current discount rateC. Market rate of returnD. Dividend yieldE. Dividend growth rate4. Which one of the following types of securities has no priority ina bankruptcy proceeding? A. Convertible bondB. Senior debtC. Common stockD. Preferred stockE. Straight bond7-1Chapter 07 - Equity Markets and Stock Valuation5. Mary owns 100 shares of stock. Each share entitles her to onevote per open seat on the board of directors. Assume there are 3 open seats in the current election and Mary casts all 300 of her votes for a single candidate. What is the term used to describe this type of voting?A. ProxyB. AggregateC. CumulativeD. StraightE. Condensed6. 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. A. simultaneousB. straightC. proxyD. cumulativeE. sequential7. Kate could not attend the last shareholders meeting and thus she granted the authority to vote on her behalf to the managers of the firm. Which one of the following terms is used to describe the method by which Kate's shares were voted?A. StraightB. CumulativeC. Consent-formD. ProxyE. In absentia8. 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.7-2Chapter 07 - Equity Markets and Stock Valuation9. Which one of the following generally pays a fixed dividend, receives first priority individend payment, and maintains the right to a dividend payment, even if that payment isdeferred?A. Cumulative commonB. Noncumulative commonC. Noncumulative preferredD. Cumulative preferredE. Senior common10. Newly issued securities are sold to investors in which one of the following markets?A. ProxyB. Stated valueC. InsideD. SecondaryE. Primary11. What is the market called that allows shareholders to resell their shares to other investors?A. PrimaryB. ProxyC. SecondaryD. InsideE. Initial12. An agent who buys and sells securities from inventory is called a: A. floor trader.B. dealer.C. commission broker.D. broker.E. floor broker.7-3Chapter 07 - Equity Markets and Stock Valuation13. A broker is an agent who:A. trades on the floor of an exchange for himself or herself.B. buys and sells from inventory.C. offers new securities for sale to dealers only.D. who is ready to buy or sell at any time.E. brings buyers and sellers together.14. Any person who owns a license to trade on the NYSE is called a:A. dealer.B. floor trader.C. specialist.D. member.E. proxy.15. A person who executes customer orders to buy and sell securities on the floor of the NYSEis called a:A. floor trader.B. specialist.C. runner.D. commission broker.E. market maker.16. A specialist is a(n):A. employee who executes orders to buy and sell for clients of hisor her brokerage firm.B. individual who trades on the floor of an exchange for his or her personal account.C. NYSE member who functions as a dealer for a limited number of securities.D. broker who buys and sells securities from a market maker.E. trader who only deals with primary offerings.7-4Chapter 07 - Equity Markets and Stock Valuation17. An individual who executes buy and sell orders on the floor ofan exchange for a fee iscalled a:A. floor broker.B. specialist.C. floor trader.D. proxy.E. flow specialist.18. The electronic system that transmits buy and sell ordersdirectly to a specialist on the floorof the NYSE is called:A. NASDAQ.B. SuperDOT.C. TICKER.D. ECN.E. ORDFLOW.19. The owner of a trading license who trades on the floor of the NYSE for his or her personalaccount is called a(n):A. specialist.B. independent broker.C. floor trader.D. stand-alone agent.E. dealer.20. The stream of customer instructions to buy and sell securities is called the:A. order flow.B. market maker.C. execution stream.D. operations flow.E. buyer's stream.7-5Chapter 07 - Equity Markets and Stock Valuation21. The specific location on the floor of an exchange where a particular security is traded iscalled a:A. box office.B. figure 6.C. specialist's post.D. trading booth.E. seat.22. Inside quotes are defined as the:A. bid and asked prices presented by NYSE specialists.B. last bid and asked price offered prior to the market close.C. lowest asked and highest bid offers.D. daily opening bid and asked quotes.E. last traded bid and asked prices.23. Which one of the following is a web site that enables Lester to sell his shares of ABC stockdirectly to Marti?A. SuperDOTB. POSTC. ECND. SEATE. eNET24. Which one of the following will increase the current value of a stock?A. Decrease in the dividend growth rateB. Increase in the required returnC. Increase in the market rate of returnD. Decrease in the expected dividend for next yearE. Increase inthe capital gains yield7-6Chapter 07 - Equity Markets and Stock Valuation25. The price of a stock at year 4 can be expressed as:A. D / (R + G). 045B. D ， (1 + R). 05C. D ， (1 + R). 1D. D/(R-g). 4E. D/(R-g). 526. 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? 1A. $1.50 ， (1.02) 2B. $1.50 ， (1.02) 3C. $1.50 ， (1.02) 4D. $1.50 ， (1.02) 5E. $1.50 ，(1.02)27. The required return on a stock is equal to which one of the following if the dividend on the stock decreases by 1 percent per year?A. (P/D)-g 01B. (D/P)/g 10C. Dividend yield + capital gains yieldD. Dividend yield - capital gains yieldE. Dividend yield ， capital gains yield28. 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. ($1.10) (1.08 ， 3) (1.02 ， 4)B. ($1.10) (1.08 ， 3) (1.02 ， 3) 34C. ($1.10) (1.08) (1.02) 33D. ($1.10) (1.08) (1.02) 32E. ($1.10) (1.08) (1.02)7-7Chapter 07 - Equity Markets and Stock Valuation29. 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 constantB. increased; remained constantC. increased; increasedD. decreased; remained constantE. decreased; decreased30. Which one of the following must equal zero if a firm pays a constant annual dividend? A. Dividend yieldB. Capital gains yieldC. Total returnD. Market value per shareE. Book value per share31. The dividend growth model can be used to value the stock of firms which pay which type of dividends?I. constant annual dividendII. annual dividend with a constant increasing rate of growthIII. annual dividend with a constant decreasing rate of growth IV. zero dividendA. I onlyB. II onlyC. II and III onlyD. I, II, and III onlyE. I, II, III, and IV7-8Chapter 07 - Equity Markets and Stock Valuation32. Kate owns a stock with a market price of $31 per share. This stock pays a constant annual dividend of $0.60 per share. If the price of the stock suddenly increases to $36 a share, you would expect the:I. dividend yield to increase.II. dividend yield to decrease.III. capital gains yield to increase.IV. capital gains yield to decrease.A. I onlyB. II onlyC. III onlyD. I and III onlyE. II and IV only33. Computing the present value of a growing perpetuity is most similar to computing the current value of which one of the following?A. Non-dividend-paying stockB. Stock with a constant dividendC. Stock with irregular dividendsD. Stock with a constant growth dividendE. Stock with growing dividends for a limited period of time34. Jensen Shipping has four open seats on its board of directors. How many shares will a shareholder need to control to ensure that his or her candidate is elected to the board given the fact that the firm uses straight voting? Assume one share equals one vote. A. 20 percent of the shares plus one voteB. 25 percent of the shares plus one voteC. 1/3 of the shares plus one voteD. 50 percent of the shares plus one voteE. 51 percent of the shares plus one vote7-9Chapter 07 - Equity Markets and Stock Valuation35. Gleason, Inc. elects its board of directors on a staggered basis using cumulative voting. This implies that: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 willbe 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.36. Which one of the following statements is correct?A. From a legal perspective, preferred stock is a form of corporate equity.B. All classes of stock must have equal voting rights per share.C. Common shareholders elect the corporate directors while the preferred shareholders vote on mergers and acquisitions.D. Dividends are tax-free income for individual investors.E. Shareholders prefer noncumulative dividends over cumulative dividends.37. Which one of the following statements is correct?A. Both preferred stock and corporate bonds can be callable.B. Both preferred stock and corporate bonds have a statedliquidation value of $1,000 each. C. Interest payments to bondholders as well as dividend payments to preferred shareholders are tax deductible expenses for the issuing firm.D. Bondholders generally receive a fixed payment while preferred shareholders receive a variable payment.E. Preferred shareholders receive preferential treatment over bondholders in a liquidation.38. If shareholders are granted a preemptive right they will:A. be given the choice of receiving dividends either in cash or in additional shares of stock.B. be paid dividends prior to the preferred shareholders during the preemptive period.C. be entitled to two votes per share of stock.D. be able to choose the timing and amount of any future dividends.E. have priority in the purchase of any newly issued shares.7-10Chapter 07 - Equity Markets and Stock Valuation39. On which one of the following dates do dividends become aliability of the issuer foraccounting purposes?A. First day of the fiscal year in which the dividend is expected to be paidB. Twelve months prior to the expected dividend payment dateC. On the declaration dateD. On the date of recordE. On the date of payment40. Dividends are which one of the following?A. Payable at the discretion of a firm's presidentB. Treated as a tax-deductible expense to the paying firmC. Paidout of aftertax profitsD. Paid to holders of record as of the declaration dateE. Only partially taxable to high-income individual shareholders41. You have agreed to pay a five percent commission to your best friend if he can locate abuyer for your car. This arrangement is most similar to the compensation arrangement forwhich one of these individuals who is involved with the stock market?A. SpecialistB. Floor traderC. Market makerD. Commission brokerE. Dealer42. To be a member of the NYSE, you must:A. be a primary dealer.B. buy a seat.C. own a trading license.D. be registered as a floor trader.E. be a specialist.7-11Chapter 07 - Equity Markets and Stock Valuation43. Which one of the following players on the floor of the NYSE is obligated to maintain a fair,orderly market for a limited number of securities? A. SpecialistB. Floor traderC. $2 brokerD. Commission brokerE. Floor broker44. The NYSE: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.45. Which one of the following parties on the NYSE floor post bid and asked prices?A. Floor tradersB. SpecialistsC. Floor brokersD. Commission brokersE. Fee brokers46. Many of the smaller sell orders sent to the floor of the NYSE are:A. handled by the floor traders.B. purchased by the commission brokers.C. electronically transmitted to the specialists.D. executed on an ECN.E. executed in the primary market.7-12Chapter 07 - Equity Markets and Stock Valuation47. If a trade is made "in the crowd", the trade has occurred: A. between a broker and a specialist.B. between two brokers.C. electronically on NASDAQ.D. on SuperDOT.E. on an ECN.48. The more actively traded large companies that are listed on NASDAQ are traded in whichone of the NASDAQ markets?A. NationalB. CapitalC. RegionalD. Global SelectE. Global49. Which one of the following features applies to NASDAQ but not the NYSE?A. Trading in the crowdB. Multiple market maker systemC. SuperDotD. Broker marketE. Physical trading floor50. Companies can list their stock on which one of the following without having to meet listingrequirements or filing financial statements with the SEC? A. NASDAQ Capital MarketB. Over-the-Counter Bulletin BoardC. Pink sheetsD. NASDAQ Global MarketE. NYSE7-13Chapter 07 - Equity Markets and Stock Valuation51. 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. $0.32B. $1.15C. $3.49D. $11.25E. $11.5252. The Glass Ceiling paid an annual dividend of $2.20 per sharelast year. Management just announced that future dividends will increase by 2.8 percent annually. What is the amount of the expected dividend in year 5?A. $2.39B. $2.41C. $2.46D. $2.53E. $2.5853. 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. $7.86B. $8.33C. $10.87D. $11.04E. $11.3854. Shoreline Foods pays a constant annual dividend of $1.60 a share and currently sells for $28.50 a share. What is the rate of return?A. 4.56 percentB. 5.39 percentC. 5.61 percentD. 6.63 percentE. 6.91 percent7-14Chapter 07 - Equity Markets and Stock Valuation55. The common stock of Green Garden Flowers is selling for $24 a share. The company pays a constant annual dividend and has a totalreturn of 3.8 percent. What is the amount of the dividend?A. $0.38B. $0.76C. $0.91D. $1.38E. $1.5456. Healthy Foods just paid its annual dividend of $1.45 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?A. $12.56B. $12.95C. $13.31D. $13.68E. $14.0757. Plastics, Inc. will pay an annual dividend of $1.85 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?A. $13.45B. $13.61C. $13.76D. $14.02E. $14.4558. The Printing Company stock is selling for $32.60 a share basedon a 14 percent rate of return. What is the amount of the next annual dividend if the dividends are increasing by 2.5 percent annually?A. $3.48B. $3.52C. $3.57D. $3.66E. $3.757-15Chapter 07 - Equity Markets and Stock Valuation59. The common stock of Mid-Towne Movers is selling for $33 a share and has a 9 percent rate of return. The growth rate of the dividends is1 percent annually. What is the amount of the next annual dividend?A. $2.58B. $2.61C. $2.64D. $2.67E. $2.7060. 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 percentB. 4.03 percentC. 4.28 percentD. 5.20 percentE. 5.49 percent61. Klaus Toys just paid its annual dividend of $1.40. The required return is 16 percent and the dividend growth rate is 2 percent. What is the expected value of this stock five years from now? A. $11.04B. $11.26C. $11.67D. $12.41E. $12.5862. This morning, you purchased a stock that will pay an annual dividend of $1.90 per share next year. You require a 12 percent rate of return and the annual dividend increases at 3.5 percent annually. What will your capital gain be on this stock if you sell it three years from now?A. $2.43B. $2.51C. $2.63D. $2.87E. $2.927-16Chapter 07 - Equity Markets and Stock Valuation63. Blackwell Ink is losing significant market share and thus its managers have decided to decrease the firm's annual dividend. The last annual dividend was $0.90 a share but all future dividends will be decreased by 5 percent annually. What is a share of this stock worth today at a required return of 15 percent?A. $4.07B. $4.28C. $4.49D. $4.72E. $4.9564. Lamey Headstones increases its annual dividend by 1.5 percent annually. The stock sells for $28.40 a share at a required return of 14 percent. What is the amount of the last dividend this company paid?A. $3.50B. $3.55C. $3.60D. $3.65E. $3.7065. The common stock of Tasty Treats is valued at $10.80 a share. The company increases its dividend by 8 percent annually and expects its next dividend to be $0.20 per share. What is the total rate of return on this stock?A. 8.64 percentB. 9.12 percentC. 9.40 percentD. 9.85 percentE. 10.64 percent66. River Rock, Inc. just paid an annual dividend of $2.80. The company has increased its dividend by 2.5 percent a year for the past ten years and expects to continue doing so. What will a share of this stock be worth six years from now if the required return is 16 percent?A. $23.60B. $24.65C. $25.08D. $25.50E. $26.907-17Chapter 07 - Equity Markets and Stock Valuation67. The Cart Wheel plans to pay an annual dividend of $1.20 pershare next year, $1.00 per share a year for the following two years, and then cease paying dividends altogether. How much is one share of this stock worth to you today if you require a 17 percent rate of return? A. $2.38B. $2.43C. $2.56D. $2.60E. $2.6468. 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 the level through year three, 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?A. $25.51B. $26.08C. $24.57D. $26.02E. $26.8469. Auto Transmissions is expected to pay annual dividends of $1.90 and $2.10 over the next two years, respectively. After that, the company expects to pay a constant dividend of $2.30 a share. What is the value of this stock at a required return of 15 percent? A. $13.67B. $14.21C. $14.83D. $15.08E. $15.607-18Chapter 07 - Equity Markets and Stock Valuation70. 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. $3.01B. $3.55C. $3.89D. $4.27E. $4.8871. Business Services, Inc. is expected to pay its first annual dividend of $0.80 per share three years from now. Starting in year six, the company is expected to start increasing the dividend by 2 percent per year. What is the value of this stock today at a required return of12 percent? A. $6.16B. $6.47C. $6.63D. $7.22E. $7.4772. 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. $8.50B. $9.67C. $10.46D. $12.23E. $12.497-19Chapter 07 - Equity Markets and Stock Valuation73. The Market Place recently announced that it will pay its first annual dividend two years from today. The first dividend will be $0.50 ashare with that amount doubling each year for the following two years. After that, the dividend is expected to increase by 4 percent annually. What is the value of this stock today if the required return is 15 percent? A. $11.68B. $12.47C. $12.99D. $14.02E. $14.9474. A firm expects to increase its annual dividend by 20 percent per year for the next two years and by 15 percent per year for the following two years. After that, the company plans to pay a constant annual dividend of $3 a share. The last dividend paid was $1.00 a share. What is the current value of this stock if the required rate of return is 12 percent?A. $17.71B. $18.97C. $20.50D. $21.08E. $21.6975. 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. $30.04B. $32.18C. $33.33D. $35.80E. $36.757-20Chapter 07 - Equity Markets and Stock Valuation76. A stock has a market price of $46.10 and pays a $2.40 annual dividend. What is the dividend yield?A. 4.13 percentB. 4.84 percentC. 5.21 percentD. 5.52 percentE. 5.78 percent77. 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 percentB. 8.00 percentC. 9.75 percentD. 10.50 percentE. 12.50 percent78. For the past six years, the price of Slate Rock stock has been increasing at a rate of 8.6 percent a year. Currently, the stock ispriced at $47 a share and has a required return of 14 percent. What is the dividend yield?A. 1.20 percentB. 2.87 percentC. 3.39 percentD. 4.28 percentE. 5.40 percent79. A stock has paid dividends of $1.80, $1.85, $2.00, $2.20, and $2.25 over the past five years, respectively. What is the average capital gains yield?A. 2.80 percentB. 3.24 percentC. 4.45 percentD. 5.34 percentE. 5.79 percent7-21Chapter 07 - Equity Markets and Stock Valuation80. The Toy Box pays an annual dividend of $2.40 per share and sells for $46.60 a share based on a market rate of return of 15 percent. What is the capital gains yield? A. 7.35 percentB. 7.78 percentC. 9.23 percentD. 9.85 percentE. 10.11 percent81. Investors receive a total return of 13.7 percent on the common stock of Dexter International. The stock is selling for $41.68 a share. What is the dividend growth rate if the company plans to pay an annual dividend of $2.10 a share next year?A. 7.42 percentB. 8.66 percentC. 10.75 percentD. 11.60 percentE. 13.70 percent82. Western Beef stock is valued at $62.10 a share. The company paysa constant annual dividend of $4.40 per share. What is the total return on this stock? A. 6.62 percentB. 6.81 percentC. 7.09 percentD. 7.49 percentE. 7.82 percent83. Last year, when the stock of Alpha Minerals was selling for $55a share the dividend yield was 3.2 percent. Today, the stock is selling for $41 a share. What is the total return on this stock if the company maintains a constant dividend growth rate of 2.5 percent? A. 6.13 percentB. 6.58 percentC. 6.90 percentD. 7.47 percentE. 7.40 percent7-22Chapter 07 - Equity Markets and Stock Valuation84. There are four open positions on the board of directors of Double Tree Restaurants. The company has 180,000 shares of stock outstanding. Each share is entitled to one vote. How many shares of stock must you own to guarantee your personal election to the board of directors if the firm uses cumulative voting?A. 36,001 sharesB. 37,501 sharesC. 38,501 sharesD. 40,001 sharesE. 42,001 shares85. A firm has two 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 12,500 shares of stock outstanding and uses cumulative voting? Each share is granted one vote.A. 3,334 sharesB. 4,168 sharesC. 5,251 sharesD. 5,501 sharesE. 6,251 shares86. Miller's Hardware has 185,000 shares of stock outstanding with a current market value of $27 a share. You own 38,000 of those shares.Next month, the election will be held to select four new members to the board of directors. The firm uses a cumulative voting system. How much additional money do you need to spend to guarantee that you will be elected to the board assuming that everyone else votes for one of the other candidates?A. $0B. $28,512C. $34,047D. $222,777E. $311,0277-23Chapter 07 - Equity Markets and Stock Valuation87. 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 sharesB. 5,134 sharesC. 3,876 sharesD. 7,751 sharesE. 7,134 shares88. Kathryn owns 18,700 shares of Global Importers. Her shares havea total market value of $787,270. In total, the firm has 65,000 shares outstanding. Each share is entitled to one vote under the straight。