Chapter 8 Learn
Stock price reporting has increasingly moved from traditional print media to the in recent years.
internet
The goal of many successful organizations is a(n) ______ rate of growth in dividends.
steady
A person who brings buyers and sellers together is called a(n) ______.
broker
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 main reason for considering nonconstant growth in dividends is to allow for _____ growth rates over _____.
supernormal; some finite length of time
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 idea for _____-stage growth is that the dividend will grow at a rate of g1 for t years and then grow at a rate of g2 thereafter, forever.
two
True or false: With more than one class of common stock, it is easier for insiders such as founding families to maintain control of the company.
true
One reason corporations use staggered boards is that _____.
it makes takeover attempts less likely to be successful
Three special case patterns of dividend growth include _____.
nonconstant growth zero growth constant growth
When assuming nonconstant growth in dividends, to avoid the problem of having to forecast and discount an infinite number of dividends, we must require that the dividends _____.
start growing at a constant rate sometime in the future
When applying two-stage growth, in the second stage, g2 _____.
must be less than R
When voting for the board of directors, the number of votes a shareholder is entitled to is usually _____ vote per share held
one
Investment firms that are active participants in stocks assigned to them are called _____ liquidity providers.
supplemental
What information do we need to determine the value of stock using the zero-growth model?
Annual dividend amount Discount rate
Which of the following are expected cash flows to investors in stocks?
Dividends Capital gains
Which one of the following is true about dividend growth patterns?
Dividends may grow at a constant rate.
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: 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 of the following are features of common stock?
It generally has voting rights. It has no special preference in bankruptcy. It has no special preference in receiving dividends.
Initial public offerings of stock occur in the ____ market.
primary
A _____ is the grant of authority by a shareholder to someone else to vote his or her shares.
proxy
The trading of existing shares occurs in the ______ market.
secondary
The NYSE member who acts as a dealer in a small number of securities is called a(n) _____.
specialist
In a ____ board, only a fraction of the directorships are up for election at any one time.
staggered
Mota Motors has eight directors on its board, two of whom go up for election each year. This is an example of a:
staggered board
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
Dusty Corporation has an issue of preferred stock that pays a dividend of 7 percent of its state value, which is $100. Which of the following would be a commonly used name for that preferred stock?
$7 preferred
NASDAQ has which of these features?
- computer network of securities dealers - multiple market maker system
A benchmark PE ratio can be determined using:
1) the PE's of similar companies 2) a company's own historical PE's
Preferred shares have a stated liquidating value, typically $_____ per share.
100
Which of the following occurs in the primary market?
Newly-issued stocks are initially sold
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?
No minority shareholder would have enough votes to win any seat on the board.
Which of the following are reasons why it is more difficult to value common stock than it is to value bonds?
The life of a common stock is essentially forever. The rate of return required by the market is not easily observed. Common stock cash flows are not known in advance
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?
cumulative
Someone who maintains an inventory of stocks and buys and sells those stocks is known as a ____.
dealer
A _____ is a payment by a corporation to shareholders, made in either cash or stock.
dividend
Common stock has no special preference either in receiving _____ or in bankruptcy.
dividends
The assumption of constant growth infers that _________.
dividends change at a constant rate
One common reason for having two classes of common stock with different voting rights is _____.
it is easier for insiders such as founding families to maintain control of the company
Most voting in large corporations is done by proxy because _____.
most small shareholders do not attend the annual meeting
Preferred stock has preference over common stock in the _____.
payment of dividends distribution of corporate assets
A stock with dividend priority over common stock is called a ______ stock.
preferred
When the stock being valued does not pay dividends,
the dividend growth model can still be used.
True or false: It can be advantageous to have a staggered board because it provides "institutional memory."
true
Which of the following entities declares a dividend?
The board of directors
