Finance Final
Plyler Cabinets declared a dividend of $1.20 a share on May 15 to holders of record on Monday, June 1. The dividend is payable on June 15. Sara purchased 500 shares of Plyler Cabinets stock on Friday, May 29. How much dividend income will she receive on June 15 from Plyler Cabinets?
$0 Sara will not receive any dividend income because she purchased the shares after the ex-dividend date
The Peanut Shack has 6,500 shares of stock outstanding with a par value of $1 per share. The current market value of the firm is $145,600. The company just announced a 3-for-2 stock split. What will the market price per share be after the split?
$14.93 Market price per share = ($145,600/6,500) × 2/3 = $14.93
Verbal Communications, Inc., has 14,000 shares of stock outstanding with a par value of $1 per share and a market value of $32 per share. The firm just announced a 100 percent stock dividend. What is the market value per share after the dividend
$16.00 Market value per share = (14,000 × $32)/(14,000 × 2) = $16
Alfonzo's Italian House has 25,000 shares of stock outstanding with a par value of $1 per share and a market price of $28 a share. The firm just announced a 5-for-3 stock split. What will the market price per share be after the split?
$16.80 Market price per share = $28 × 3/5 = $16.80
Tucker's National Distributing has a current market value of equity of $10,665. Currently, the firm has excess cash of $640, total assets of $22,400, net income of $3,210, and 500 shares of stock outstanding. Tucker's is going to use all of its excess cash to repurchase shares of stock. What will the stock price per share be after the stock repurchase is completed?
$21.33 Current price per share = $10,665/500 = $21.33 Number of shares repurchased = $640/$21.33 = 30 New number of shares outstanding = 500 - 30 = 470 New equity = $10,665 - $640 = $10,025 New price per share = $10,025/470 = $21.33
On July 7, you purchased 500 shares of Wagoneer, Inc. stock for $21 a share. On August 1, you sold 200 shares of this stock for $28 a share. You sold an additional 100 shares on August 17 at a price of $25 a share. The company declared a $0.95 per share dividend on August 4 to holders of record as of Wednesday, August 15. This dividend is payable on September 1. How much dividend income will you receive on September 1 as a result of your ownership of Wagoneer stock?
$285 =Dividend received = $0.95 × (500 - 200) = $285
One year ago, you purchased 400 shares of stock for $12 a share. The stock pays $0.22 a share in dividends each year. Today, you sold your shares for $28.30 a share. What is your total dollar return on this investment?
$6608 Total dollar return = 400 × ($28.30 − $12 + $0.22) = $6,608
One year ago, Neal purchased 3,600 shares of Franklin stock for $101,124. Today, he sold those shares for $26.60 a share. What is the total return on this investment if the dividend yield is 1.7 percent
-3.6% Purchase price = $101,124/3,600 shares = $28.09 a share Total return = [($26.60 - $28.09)/$28.09] + 0.017 = -3.60 percent
Over the past five years, a stock returned 8.3 percent, -32.5 percent, -2.2 percent, 46.9 percent and 11.8 percent. What is the variance of these returns?
0.081504 Average return = (0.083 −0.325 - 0.022 + 0.469 + 0.118)/5 = .0646 σ2 = [(0.083 - 0.0646)2 + (-0.325 - .0646)2 + (-0.022 - 0.0646)2 + (0.469 - 0.0646)2 + (0.118 - 0.0646)2]/(5 - 1) = 0.081504
One year ago, you bought a stock for $36.48 a share. You received a dividend of $1.62 per share last month and sold the stock today for $40.18 a share. What is the capital gains yield on this investment?
10.14% Capital gains yield = ($40.18− $36.48)/$36.48 = 10.14 percent
Over the past six years, a stock had annual returns of 14 percent, -3 percent, 8 percent, 21 percent, -16 percent, and 4 percent, respectively. What is the standard deviation of these returns?
13.05% Average return = (0.14 - 0.03 + 0.08 + 0.21 - 0.16 + 0.04)/6 = 0.046667 σ2 = [(0.14 - 0.046667)2 + (-0.03 - 0.046667)2 + (0.08 - 0.046667)2 + (0.21 - 00.046667)2 + (-0.16 - 0.046667)2 + (0.04 - 0.046667)2]/(6 - 1) = 0.017027 σ = √0.017027 = 13.05 percent
The ex-dividend date is defined as ___ business days before the date of record
2
You purchased 1,300 shares of LKL stock 5 years ago and have earned annual returns of 7.1 percent, 11.2 percent, 3.6 percent, -4.7 percent and 11.8 percent. What is your arithmetic average return?
5.8% Arithmetic average = (0.071 + 0.112 + 0.036 - 0.047 + 0.118)/5 = 5.80 percent
The Peace River Corporation has 62,000 shares of stock outstanding at a market price of $48 a share. The company has just announced a 3-for-2 stock split. How many shares of stock will be outstanding after the split?
93,000 shares Number of shares = 62,000 × 3/2 = 93,000 shares
The board of directors of Wilson Sporting Equipment met this afternoon and passed a resolution to pay a cash dividend of $0.42 a share next month. In relation to this dividend, today is referred to as which one of the following dates?
Declaration Date
All else equal, the market value of a stock will tend to decrease by roughly the aftertax value of the dividend on the:
Ex dividend date
Kate purchased 500 shares of Fast Deliveries stock on Wednesday, July 7th. Ted purchased 100 shares of Fast Deliveries stock on Thursday, July 8th. Fast Deliveries declared a dividend on June 20th to shareholders of record on July 12th and payable on August 1st. Which one of the following statements concerning the dividend paid on August 1st is correct given this information?
Kate is entitled to the dividend but Ted is not
HJ Corporation has excess cash and has opted to buy some of its shares of outstanding common stock. What is this process of buying called?
Stock Repurchase
8.11% Geometric average return = (1.163 × 1.072 × 1.118 × 0.964 × 1.099)1/5 − 1 = 8.11 percent
The common stock of Western Hill Farms has yielded 16.3 percent, 7.2 percent, 11.8 percent, -3.6 percent, and 9.9 percent over the past five years, respectively. What is the geometric average return? 8.11% Geometric average return = (1.163 × 1.072 × 1.118 × 0.964 × 1.099)1/5 − 1 = 8.11 percent
Which one of the following statements is correct concerning both the dollar return and the percentage return on a stock investment?
The dollar return is dependent on the size of the investment while the percentage return is not.
Billingsley United declared a $0.20 a share dividend on Thursday, October 16. The dividend will be paid on Monday, November 10 to shareholders of record on Friday, October 31. Which one of the following is the ex-dividend date?
Wednesday October 29
The return earned in an average year over a multi-year period is called the _____ average return
arithmetic
Green Roof Motels has more cash on hand than its operations require. Thus, the firm has decided to pay out some of its earnings in the form of cash to its shareholders. What are these payments to shareholders called?
dividends
Assume that the market prices of the securities that trade in a particular market fairly reflect the available information related to those securities. Which one of the following terms best defines that market?
efficient capitol market
The average compound return earned per year over a multi-year period is called the _____ average return
geometric
Steve owns 3,000 shares of NOP, Inc. stock, which he purchased six years ago at a price of $22 a share. Today, these shares are selling for $68 each. Assume the current tax laws are such that Steve is subject to a tax rate of 25 percent on both his dividend income and his capital gains. From Steve's point of view, a stock repurchase today: (Ignore costs)
is more desirable than a tax dividend in respect to taxes
The lower the standard deviation of returns on a security, the _____ the expected rate of return and the _____ the risk.
lower, lower
Which one of the following is the most apt to have the largest risk premium in the future based on the historical record for 1926-2008?
small company stocks
The higher the expected rate of return..
the wider the distribution of returns
The standard deviation measures the _____ of a security's returns over time.
volatility
