FIN 301 - CH 8

T or F For investors in the stock market, dividends from stocks are fixed and guaranteed, while capital gains are variable and not guaranteed.

False

T or F For investors in the stock market, dividends from stocks are fixed and guaranteed, while capital gains are variable and not guaranteed.

false

True or false: It can be advantageous to have a staggered board because it provides "institutional memory."

True

A stock with dividend priority over common stock is called a _____stock.

preferred

A share of common stock is _____ (less/more) difficult to value in practice than a bond

more

Select all that apply Which of the following are features of common stock? Multiple select question. a) It has no special preference in bankruptcy. b) It receives dividends every quarter. c) It generally has voting rights. d) It receives interest semi-annually. e) It has no special preference in receiving dividends.

a,c,e

When voting for the board of directors, the number of votes a shareholder is entitled to is generally determined as follows: Multiple choice question. a) one vote for every 100 shares held b) one vote per proxy c) one vote per share held d) one vote per shareholder

c

Mota Motors has eight directors on its board, two of whom go up for election each year. This is an example of a: Multiple choice question. a)voting rights board b)staggered board c)managed board d)proxy board

b

True or false: Cumulative voting means board members are elected one at a time, with each shareholder casting his or her allotted votes for each seat on the board.

False

Which one of the following is true about dividend growth patterns ? a) dividends may grow at a constant rate b)dividends never grow c)dividends grow at a differential rate d)dividends always grow at a constant rate

a

Preferred stock has preference over common stock in the _____. Multiple select question. distribution of corporate assets payment of dividends number of votes given portfolios of individual investors

a,b

Which of the following are reasons why it is more difficult to value common stock than it is to value bonds? Select all that apply a) All bond and stock cash flows are guaranteed to be paid b) the rate of return required by the market is not easily observed c) the life of a common stock is essentially forever d) common stock cash flows are not known in advance

b,c,d

Which of the following are expected cash flows to investors in stocks? Multiple select question. Fees Capital gains Interest Dividends

b,d

Suppose Bob owns 20 shares and Vikki owns 30 shares in Good Company, and there are five members of the board of directors. Under which voting arrangement can Bob assure himself of a board member that represents his interests? a) straight voting b) minority voting c) cumulative voting

c

The assumption of constant growth infers that _____ a) the real interest rate remains constant b) stock prices remain constant c) dividends change at a constant rate

c

Valuation of Stock using a Zero Growth Model (equation)

Dividends/Discount Rate

Dividend Growth Patterns

1) the dividend has zero growth rate 2) the dividend grows at a constant rate 3) the dividend grows at a constant rate after some length of time

A zero-growth model for stock valuation is distinguished by a ____. Multiple choice question. a)constant discount rate b)negative dividend growth rate c)zero stock price at Year 0 d)constant dividend amount

d

Which of the following entities declares a dividend? Multiple choice question. a)The CFO b)The management of the company c)Existing shareholders d)The board of directors

d

In a _______board, only a fraction of the directorships are up for election at any one time.

staggered

Which of the following are reasons why it is more difficult to value common stock than it is to value bonds? Multiple select question. a)The life of a common stock is essentially forever. b)Common stock cash flows are not known in advance c)The rate of return required by the market is not easily observed. d)All bond and stock cash flows are guaranteed to be paid.

a,b,c

When the stock being valued does not pay dividends, ____ a) the dividend growth model can not be used b) the dividend growth model can still be used

b

When voting for the board of directors, the number of votes a shareholder is entitled to is usually ____ vote per share held.

one or a

With ____ voting, the directors are elected one at a time and the only way to guarantee a seat is to own 50 percent plus one share.

straight

The goal of many successful organizations is a(n) ______ rate of growth in dividends. Multiple choice question. a) erratic b)steady c)zero d)negative

b

A benchmark PE ratio can be determined using: Multiple select question. a)the PEs of similar companies b)the constant-growth model c)Bank of Canada estimates d)a company's own historical PEs

a,d

T or F For investors in the stock market, dividends from stocks are fixed and guaranteed, while capital gains are variable and not guaranteed.

False

common stock has no preference in receiving ___ or in bankruptcy

dividends

Three special case patterns of dividend growth include _____. Multiple select question. a)negative growth b)discounted growth c)fast growth d)constant growth e)zero growth f)nonconstant growth

d,e,f

Select all that apply A benchmark PE ratio can be determined using: Multiple select question. a)a company's own historical PEs b)the constant-growth model c)Bank of Canada estimates d)the PEs of similar companies

a,d

One reason corporations use staggered boards is that _____. Multiple choice question. a)all board members are elected at the same time, so the election process works more smoothly b)it makes takeover attempts less likely to be successful c)it attracts potential acquirers d)it makes it easier for minority shareholders to elect a director to represent them

b

WinWin Corporation has five board members, and each shareholder gets one vote per share. The company uses a straight board voting procedure. How does this arrangement affect minority shareholders? Multiple choice question. a) Corporations always have one board member designated to protect the interests of minority shareholders. b)Minority shareholders don't vote in such an arrangement. c)Each minority shareholder would have one preferred board member. d)No minority shareholder would have enough votes to win any seat on the board.

d

With ______ voting, the directors are elected one at a time and the only way to guarantee a seat is to own 50 percent plus one share.

straight