FIN CH 8 Exam 3
A benchmark PE ratio can be determined using:
a company's own historical PEs the PEs of similar companies
Three special case patterns of dividend growth include _____.
nonconstant growth zero growth constant growth
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
A stock with dividend priority over common stock is called a ________stock.
preferred
Initial public offerings of stock occur in the ____ market.
primary
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
The goal of many successful organizations is a(n) ______ rate of growth in dividends. Multiple choice question.
steady
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
Investment firms that are active participants in stocks assigned to them are called ____________ liquidity providers.
supplemental
When the stock being valued does not pay dividends,
the dividend growth model can still be used.
Three special case patterns of dividend growth include _____.
zero growth nonconstant growth constant growth
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?
$2/0.10 = $20
Capital Corp is considering a project whose internal rate of return is 14%. If Capital's required return is 14%, the project's NPV is:
0. The internal rate of return is the rate that makes NPV = 0. Because Capital's IRR is equal to its required rate, the NPV must be zero.
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?
Capital gains Dividends
NASDAQ has which of these features?
Computer network of securities dealers Multiple market maker system
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 voting
Which one of the following is true about dividend growth patterns? Dividends always grow at a constant rate. Dividends never grow. Dividends may grow at a constant rate. Dividends always grow at a differential rate.
Dividends may grow at a constant rate.
Which of the following are features of common stock?
It has no special preference in bankruptcy. It generally has voting rights. It has no special preference in receiving dividends.
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 entities declares a dividend?
The board of directors
A person who brings buyers and sellers together is called a(n) ______.
broker
A zero-growth model for stock valuation is distinguished by a ____.
constant dividend amount
Someone who maintains an inventory of stocks and buys and sells those stocks is known as a ____.
dealer
An NYSE member who acts as a dealer in particular stocks is called a ________--- market maker.
designated
Preferred stock has preference over common stock in the _____. A) distribution of corporate assets B) payment of dividends C) portfolios of individual investors D) number of votes given
distribution of corporate assets payment of dividends
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
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
For investors in the stock market, dividends from stocks are fixed and guaranteed, while capital gains are variable and not guaranteed.
false
An NYSE member who executes customer buy and sell orders is called a _________ broker.
floor
Stock price reporting has increasingly moved from traditional print media to the ______ in recent years.
internet
Stock price reporting has increasingly moved from traditional print media to the __________ in recent years.
internet
