Finance Exam 3 Conceptual Questions

Corporate dividends

are taxed at the personal level even though they are paid from after-tax income.

Which one of these represents the portion of a stock's rate of return that is attributable to the growth rate of the dividends?

capital gains yield

The total return on a stock is equal to

capital gains yield + dividend yield

Based on the dividend growth model, an increase in investors' overall level of required returns will

cause the market values of all stocks to decrease, all else held constant.

The voting procedure whereby shareholders may cast all of their votes for one candidate for the board of directors is called ________ voting

cumulative

The market in which new securities are originally sold to investors is called the ________ market.

primary

8. The voting procedure where a shareholder grants authority to another individual to vote his/her shares is called ________ voting.

proxy

According to finance professionals, which one of these factors has the biggest impact on a firm's PE ratio?

Growth opportunities

Jack owns shares of stock in Boynton Foods and wants to be elected to the company's board of directors. There are 10,000 shares of stock outstanding and each share is granted one vote for each open position on the board. Presently, the company is voting to elect two new directors. Jack can be assured of his election

if cumulative voting applies and he owns one-third of the shares, plus one additional share.

The owner of preferred stock

is entitled to a distribution of income prior to the common shareholders.

Alto stock pays an annual dividend of $1.10 a share and has done so for the past 6 years. No changes in the dividend amount are expected. The relevant market rate of return is 7.8 percent. Given this, one share of this stock

is valued as a perpetuity.

Lew, an individual investor, sold 100 shares of Global Tech stock on Monday. Janice, another individual investor, purchased those shares but never met Lew. You know for certain that this trade occurred in which market?

secoundary market

7. The voting procedure where you must control 50 percent plus one of the outstanding shares of stock to guarantee that you will win a seat on the board of directors is called ________ voting.

straight