Fin 3200 Ch. 7
Triad common stock is selling for $27.80 a share and has a dividend yield of 2.8 percent. What is the dividend amount?
$.78
Delfino's expect 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 dividends by 2 percent annually?
$1.50x(1.02)^4
A zero-growth stock pays a dividend of $2 per share and has a discount rate of 10%. What will the stock's price be?
$20.00 2/.10=20
What is the price of a stock at the end of one year if the dividend for year 2 is $5, the price for year 2 is $20, and the discount rate is 10%?
$22.73 (5+20)/1.10=22.73
Stana, Inc., has preferred stock outstanding that sells for $99.81 per share. If the required return is 3.93 percent, what is the annual dividend?
$3.92
Nu-Tek is expanding rapidly. As a result, the company expects to pay annual dividends of $.62, $.80, and $1.05 per share over the next three years, respectively. After that, the dividend is projected to increase by 4 percent annually. What is the current value of this stock if the required return is 16 percent?
$7.63
The NYSE differs from the NASDAQ primarily because the NYSE has:
1. A physical location 2. A face-to-face auction market
What information do we need to determine the value of a stock using the zero growth model?
1. Discount rate 2. Dividend
Which of the following are reasons that making valuing a share of stock more difficult than valuing a bond?
1. Dividends are unknown and uncertain 2. The required rate of return is unobservable 3. Stock has no set maturity
NASDAQ has which of these features?
1. Multiple market maker system 2. Computer network of securities dealers
Which of the following ratios might be used to estimate the value of a stock?
1. The Price/Earnings ratio 2. The Price/Sales ratio
Which of the following are rights of common stock holders?
1. The right to share proportionally in any residual value in the event of liquidation 2. The right to share proportionally in any common dividends paid 3. The right to vote on matters of importance
Three special case patterns of dividend growth discussed in the textbook include:
1. Zero growth 2. Non-constant growth 3. Constant growth
What is the total return for a stock that currently sells for $100, is expected to pay a dividend in one year of $2, and has a constant growth rate of 8%?
10%
If Joan owns 100 shares of ABC company and the company is electing 4 directors, under cumulative voting, Joan would usually have ___________ votes.
400
A person who brings buyers and sellers together is called a(n) _______________.
Broker
Which one of the following must equal zero if a firm pays a constant annual dividend?
Capital gains yield
If unpaid preferred dividends must be "caught up" before any common dividends can be paid, they are called ________________ dividends.
Cumulative
All else constant, the dividend yield will increase if the stock price ________________. (increase, decrease)
Decreases
The required return on a stock is equal to which of the following if the dividend on the stock decreases by a constant percent per year?
Dividend yield + Capital gains yield
The constant-growth model assumes that ____________________.
Dividends change at a constant rate
The price of a share of common stock is equal to the present value of all ______________ future dividends.
Expected
For investors in the stock market, dividends are fixed and guaranteed, while capital gains are variable on not guaranteed
False
A PE ratio that is based on estimated future earnings is known as a __________________ PE ratio.
Forward
The __________ can be interpreted as the capital gains yield.
Growth rate
Which one of the following will increase the current value of a stock?
Increase in the capital gains yield
Stock price reporting has increasingly moved from traditional print media to the _______________ in recent years.
Internet
The two most important stock markets in the U.S. are the New York Stock Exchange and ________________.
NASDAQ
The dividend yield is defined as:
Next year's expected dividend divided by the current market price per share
This type of growth describes a company that grows quickly at first, then slower in future years.
Non-constant
When voting for the board of directors, the number of votes a shareholder is entitled to is generally determined as follows:
One vote per share held
The fundamental business of the New York Stock Exchange is to attract ______________.
Order flow
Match the following terms related to stock valuation
P1 = Price in one year D1 = Next expected dividend R = Discount rate P0 = Price today P0 = Dividend just paid
Initial public offerings of stock occur in the ______________ market.
Primary
Newly issued securities are sold to investors in which of the following markets?
Primary
Shares of stock are first brought to the market and sold to investors in the __________________ market.
Primary
What is the market called that facilitates the sale of shares between individual investors?
Secondary
New York Stock Exchange Designated market Makers (DMMs) were formerly called _________________.
Specialists
Using a benchmark PE ratio against current earnings yields a forecasted price called a _______________ price.
Target
The dividend yield is determined by dividing the expected dividend by:
The current price
If the growth rate (g) is zero, the capital gains yield is ___________.
Zero
