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Net present value involves discounting an investment's:
 
A) future profits.
B) future cash flows.
C) assets.
D) liabilities.
E) costs.
   
Which one of the following indicates that a project is expected to create value for its owners?
 
A) Positive net present value
B) Positive average accounting rate of return
C) Payback period greater than the requirement
D) Internal rate of return that is less than the requirement
E) Profitability index less than 1.0
   
An investment has conventional cash flows and a profitability index of 1.0. Given this, which one of the following must be true?
 
A) The net present value is greater than 1.0.
B) The average accounting return is 1.0.
C) The net present value is equal to zero.
D) The investment never pays back.
E) The internal rate of return exceeds the required rate of return.
   
Which one of the following methods of analysis ignores cash flows?
 
A) Profitability index
B) Modified internal rate of return
C) Payback
D) Average accounting return
E) Internal rate of return
   
Which one of the following is most closely related to the net present value profile?
 
A) Discounted payback
B) Internal rate of return
C) Profitability index
D) Average accounting return
E) Payback
   
You are considering the following two mutually exclusive projects. The required return on each project is 14 percent.
Which project should you accept and what is the best reason for that decision?
 
A) Project A; because it pays back faster
B) Project B; because it has the higher net present value
C) Project B; because it has the higher profitability index
D) Project A; because it has the higher profitability index
E) Project A; because it has the higher net present value
   
A broker is an agent who:
 
A) offers new securities for sale to dealers only.
B) is ready to buy or sell at any time.
C) trades on the floor of an exchange for himself or herself.
D) brings buyers and sellers together.
E) buys and sells from inventory.
   
Which one of the following will occur when the internal rate of return
equals the required return?
 
A) The net present value will equal the initial cash outflow.
B) The profitability index will equal the average accounting return.
C) The average accounting return will equal 1.0.
D) The profitability index will equal 1.0.
E) The profitability index will equal 0.
The profitability index will equal 1.0
   
If shareholders are granted a preemptive right they will:
 
A) be paid dividends prior to the preferred shareholders during the preemptive period.
B) be entitled to two votes per share of stock.
C) have priority in the purchase of any newly issued shares.
D) be given the choice of receiving dividends either in cash or in additional shares of stock.
E) be able to choose the timing and amount of any future dividends.
   
Which one of the following statements is correct?
 
A) The payback period considers the timing and amount of all of a project's cash flows.
B) The payback rule states that you should accept a project if the payback period is less than one year.
C) The payback rule is biased in favor of long-term projects.
D) The payback period ignores the time value of money.
E) A longer payback period is preferred over a shorter payback period.
   
What is the market called that facilitates the sale of shares between individual investors?
 
A) Inside
B) Secondary
C) Initial
D) Primary
E) Proxy
   
Quattro, Inc. has the following mutually exclusive projects available. The company has historically used a
four-year cutoff for projects.  The required return is 11 percent.
 
A) 3.92 years; 3.79 years; -$17,108.60; $1,211.48; accept Project B only
B) 3.96 years; 3.42 years; -$19,764.06; -$10,566.02; reject both projects
C) 4.06 years; 3.79 years; $211.60; -$7,945.93; accept Project A only
D) 3.92 years; 3.64 years; $780.85; $1,211.48; accept both Projects
E) 3.96 years; 3.42 years; $17,780.85; -$1,211.48; accept Project A only
   
Based on the most recent survey information presented in your textbook, CFOs tend to use which two
methods of  investment analysis the most frequently?
 
A) Payback and internal rate of return
B) Payback and net present value
C) Internal rate of return and net present value
D) Profitability index and internal rate of return
E) Net present value and profitability index
   
Which one of the following is an indicator that an investment is acceptable? Assume cash flows are conventional.
 
A) Profitability index of zero
B) Modified internal rate of return that is equal to zero
C) Payback period that exceeds the required period
D) Negative average accounting return
E) Internal rate of return that exceeds the required return
   
Which one of the following methods of analysis ignores the time value of money?
 
A) Discounted cash flow analysis
B) Profitability index
C) Internal rate of return
D) Payback
E) Net present value
   
You were recently hired by a firm as a project analyst. The owner of the firm is unfamiliar with financial analysis and
wants to know only what the expected dollar return is per dollar spent on a given project. Which financial method of
analysis will provide the information that the owner requests?
 
A) Modified internal rate of return
B) Payback
C) Profitability index
D) Internal rate of return
E) Net present value
   
Mary owns 100 shares of stock. Each share entitles her to one vote per open seat on the board of directors.
Assume there are three open seats in the current election and Mary casts all 300 of her votes for a single
candidate. What is the term used to describe this type of voting?
 
A) Aggregate
B) Condensed
C) Straight
D) Cumulative
E) Proxy
   
Jensen Shipping has four open seats on its board of directors. How many shares will a shareholder need to
control to ensure that his or her candidate is elected to the board given the fact that the firm uses straight voting?
Assume each share receives one vote.
 
A) One-third of the shares plus one share
B) Twenty percent of the shares plus one share
C) Twenty-five percent of the shares plus one share
D) Fifty percent of the shares plus one share
E) Fifty-one percent of the shares plus one share
   
Mary has just been asked to analyze an investment to determine if it is acceptable. Unfortunately, she is not being given
sufficient time to analyze the project using various methods. She must select one method of analysis and provide an
answer based solely on that method. Which method do you suggest she use in this situation?
 
A) Profitability index
B) Internal rate of return
C) Average accounting rate of return
D) Net present value
E) Payback
   
The stream of customer instructions to buy and sell securities is called the:
 
A) order flow.
B) buyer's stream.
C) execution stream.
D) market maker.
E) operations flow.
   
Which one of the following is specifically designed to compute the rate of return on a project that has a multiple
negative cash flows that are interrupted by one or more positive cash flows?
 
A) Modified internal rate of return
B) Internal rate of return
C) Average accounting return
D) Profitability index
E) Indexed rate of return
   
The internal rate of return is unreliable as an indicator of whether or
not an investment should be accepted given which one of the following?
 
A) The cash flows are conventional.
B) The investment has cash inflows that occur after the required payback period.
C) One of the time periods within the investment period has a cash flow equal to zero.
D) The investment is mutually exclusive with another investment of a different size.
E) The initial cash flow is negative.
   
The net present value:
 
A) ignores cash flows that are distant in the future.
B) is equal to the initial investment when the internal rate of return
is equal to the required return.
C) method of analysis cannot be applied to mutually exclusive projects.
D) decreases as the required rate of return increases.
E) is unaffected by the timing of an investment's cash flows.
   
Which one of the following indicates that a project should be rejected? Assume the cash flows are normal, i.e.,
the initial cash flow is negative.
 
A) Average accounting return that exceeds the requirement
B) Payback period that is shorter than the requirement period
C) Profitability index less than 1.0
D) Internal rate of return that exceeds the required return
E) Positive net present value
   
On which one of the following dates do dividends become a liability of the issuer for accounting purposes?
 
A) On the date the board declares the dividend
b) First day of the fiscal year in which the dividend is expected to be paid
C) On the date of payment
D) Twelve months prior to the expected dividend payment date
E) On the date the company announces the dividend to the public
   
If an investment is producing a return that is equal to the required return, the investment's net present value will be:
 
A) zero.
B) equal to the project's net profit.
C) less than, or equal to, zero.
D) positive.
E) greater than the project's initial investment.
   
The Impulse Shopper recently paid an annual dividend of $1.13 per share.
The company just announced that it is suspending all dividend payments on its common stock for the next five years.
After that, the company expects to pay $.50 a share at the end of each year. At a required return of 18 percent,
what is this stock worth today?
 
$2.78
$1.13
$1.21
$0
$1.03
 
P0 = ($.50/.18) / (1 + .18)5 = $1.21
   
The constant growth model can be used to value the stock of firms that have which type(s) of dividends?
 
Dividends that change by either a constant amount or a constant rate
Only dividends that increase at a constant rate
Dividends that are either constant or change annually at a constant rate
Dividends that change annually by a constant amount or that are zero
Dividends that change annually by a constant amount
   
A person who executes customer orders to buy and sell securities on the floor of the NYSE is called a:
 
designated market maker (DMM).
Floor broker
runner.
supplemental liquidity provider (SLP).
market maker.
   
Kate could not attend the last shareholders' meeting and thus she granted the authority to vote on her behalf
to the managers of the firm. Which term applies to this granting of authority?
 
Proxy
Consent-form
Cumulative
Straight
In absentia
   
Which one of the following will increase the current value of a stock?
 
Increase in the required return
Increase in the market rate of return
Decrease in the expected dividend for next year
Increase in the capital gains yield
Decrease in the dividend growth rate
   
To be a member of the NYSE, you must:
 
be a DMM.
be a primary dealer.
own a trading license.
be registered as a floor trader.
buy a seat.
   
Best Ever Toys just paid its annual dividend of $1.78 per share.
The required return is 10.6 percent and the dividend growth rate is 1.23 percent.
What is the expected value of this stock five years from now?
 
$19.78
$18.45
$20.19
$22.06
$20.44
 
P5 = [$1.78 × (1 + .0123)6]/(.106-.0123) = $20.44
   
Sugar Cookies will pay an annual dividend of $1.23 a share next year. The firm expects to increase this dividend by
8 percent per year the following four years and then decrease the dividend growth to 2 percent annually thereafter.
Which one of the following is the correct computation of the dividend for Year 7?
 
($1.23) × (1.08 ×4) × (1.02 × 2)
($1.23) × (1.08)4 × (1.02)3
($1.23) × (1.08)4 × (1.02)2
($1.23) × (1.08 × 4) × (1.02 × 3)
($1.23) × (1.08)4 × (1.02)4
   
According to today’s stock report, BL Lumber shares were up .14, the stock dividend yield is 2.6 percent,
and the PE ratio is 9.8. What is the amount of the next annual dividend if yesterday's closing price was $35.14?
 
$.924
$.917
$.914
$9.31
$.918
 
35.14 + .14 = 35.28
.026 / 35.28 = 35.28 x .026 = .91720
   
There are two open seats on the board of directors. If two separate votes occur to elect the new directors,
the firm is using a type of voting that is best described as _____ voting.
 
sequential
simultaneous
cumulative
proxy
straight
   
In November 2013, the NYSE was acquired by:
 
Euronext.
the Amsterdam Exchange.
the American Stock Exchange.   
the Intercontinental Exchange
the Securities Exchange Commission.
   
Newly issued securities are sold to investors in which one of the following markets?
 
Stated value
Inside
Secondary
Proxy
Primary
   
Newly issued securities are sold to investors in which one of the following markets?
 
Primary
   
What is the market called that allows shareholders to resell their shares to other investors?
 
Secondary
   
An agent who buys and sells securities from inventory is called a:
 
dealer
   
A broker is an agent who:
 
brings buyers and sellers together
   
Any person who owns a license to trade on the NYSE is called a:
 
member
   
NYSE member who functions as a dealer for a limited number of securities.
 
a DMM
   
An individual who executes buy and sell orders on the floor of an exchange for a fee is called a:
 
floor broker
   
The owner of a trading license who trades on the floor of the NYSE for his or her personal account is called a(n):
 
floor trader
   
The stream of customer instructions to buy and sell securities is called the:
 
order flow
   
Inside quotes are defined as the:
 
lowest asked and highest bid offers.
   
Which one of the following will increase the current value of a stock?
 
increase in the capital gains yield
   
Jensen Shipping has four open seats on its board of directors. How many shares will a shareholder need to control to ensure that
his or her candidate is elected to the board given the fact that the firm uses straight voting?
Assume one share equals one vote.
 
50 percent of the shares plus one vote
   
You have agreed to pay a 5 percent commission to your best friend if he can locate a buyer for your car.
This arrangement is most similar to the compensation arrangement for which one of these individuals who
is involved with the stock market?
 
Commission Broker
   
To be a member of the NYSE, you must:
 
own a trading license
   
Which one of the following parties on the NYSE floor posts bid and asked prices?
 
DMMs
   
If a trade is made "in the crowd," the trade has occurred:
 
between two brokers
   
Swan Lake Marina is expected to pay an annual dividend of $1.58 next year.
The stock is selling for $18.53 a share and has a total return of 12 percent.
What is the dividend growth rate?
 
3.47 percent
  Lamey Headstones increases its annual dividend by 1.5 percent annually.
The stock sells for $28.40 a share at a required return of 14 percent.
What is the amount of the last dividend this company paid?
 
$3.50
   
The common stock of The Garden of Eden is selling for $42 a share.
The company pays a constant annual dividend and has a total return of 5.8 percent.
What is the amount of the dividend?

$6.81
$3.70
$1.02
$2.04
$2.44
   
What is the market called that allows shareholders to resell their shares to other investors?
Inside
Proxy
Primary
Initial
Secondary
   
Shoreline Foods pays a constant annual dividend of $1.60 a share and currently sells for $28.50 a share.
What is the rate of return?

6.91 percent
4.56 percent
6.63 percent
5.39 percent
5.61 percent
 
R=$1.60 / $28.50 = 5.61 percent
   
Healthy Foods just paid its annual dividend of $1.45 a share.
The firm recently announced that all future dividends will be increased by 2.8 percent annually.
What is one share of this stock worth to you if you require a 14 percent rate of return?


$12.56
$14.07
$13.31
$12.95
$13.68
 
P0 = ($1.45 × 1.028) / (0.14 - 0.028) = $13.31)
   
A DMM is a(n):

trader who deals only with primary offerings.
NYSE member who functions as a dealer for a limited number of securities.
employee who executes orders to buy and sell for clients of his or her brokerage firm.
individual who trades on the floor of an exchange for his or her personal account.
broker who buys and sells securities from a market maker.
   
The price of a stock at year 4 can be expressed as:

D1 × (1 + R)⁵
D4 / (R - g)
D5 / (R - g)
D0 / (R + g4)
D0 × (1 + R)⁵
   
Which one of the following types of securities has no priority in a bankruptcy proceeding?


Straight bond
Convertible bond
Common stock
Senior debt
Preferred stock
   
Reynolds Metals common stock is selling for $25 a share and has a dividend yield of 3.1 percent.
What is the dividend amount?
$0.31
$7.80
$4.25
$0.78
$3.49
 
Dividend = 0.031 × $25 = $0.78
   
Swan Lake Marina is expected to pay an annual dividend of $1.58 next year.
The stock is selling for $18.53 a share and has a total return of 12 percent.
What is the dividend growth rate?
3.28 percent
2.82 percent
3.03 percent
3.66 percent
3.47 percent
 
g = 0.12 - ($1.58/$18.53) = 3.47 percent
   
The Glass Ceiling paid an annual dividend of $2.20 per share last year.
Management just announced that future dividends will increase by 2.8 percent annually.
What is the amount of the expected dividend in year 5?

$2.53
$2.36
$2.39
$2.41
$2.58
 
D5 = $2.20 × (1.028)5 = $2.53
   
Braxton's Cleaning Company stock is selling for $32.60 a share based on a 14 percent rate of return.
What is the amount of the next annual dividend if the dividends are increasing by 5 percent annually?

$2.93
$2.71
$2.75
$2.78
$2.86
   
A broker is an agent who: offers new securities for sale to dealers only.


trades on the floor of an exchange for himself or herself.
buys and sells from inventory.
is ready to buy or sell at any time.
brings buyers and sellers together.
   
Kate could not attend the last shareholders' meeting and thus she granted the authority to vote on her behalf to the managers
of the firm. Which one of the following terms is used to describe the method by which Kate's shares were voted?


In absentia
Proxy
Cumulative
Consent-form
Straight
   
Newly issued securities are sold to investors in which one of the following markets?


Inside
Proxy
Primary
Secondary
Stated value
   
The Waffle House pays a constant annual dividend of $1.25 per share.
How much are you willing to pay for one share if you require a 25 percent rate of return?


$6.63
$4.72
$6.83
$6.52
$5.00
 
P = $1.25/0.25 = $5.00
   
Solar Energy, Inc. will pay an annual dividend of $1.85 next year.
The company just announced that future dividends will be increasing by 2 percent annually.
How much are you willing to pay for one share of this stock if you require a 14 percent return?


$15.78
$15.42
$15.14
$16.62
$16.12
 
$15.42 (Po = $1.85/(0.14 - 0.02) = $15.42
   
Delfino's expects to pay an annual dividend of $1.50 per share next year.
What is the anticipated dividend for year 5 if the firm increases its dividend by 2 percent annually?


$1.50 × (1.02)³
$1.50 × (1.02)⁴
$1.50 × (1.02)²
$1.50 × (1.02)¹
$1.50 × (1.02)⁵
   
The dividend yield is defined as:


next year's expected cash dividend divided by the current book value per share.
the current annual cash dividend divided by the current market price per share.
the current annual cash dividend divided by the current book value per share.
next year's expected cash dividend divided by next year's expected market price per share.
next year's expected cash dividend divided by the current market price per share.
   
What is the name given to the model that computes the present value of a stock by dividing next year's annual
dividend amount by the difference between the discount rate and the rate of change in the annual dividend amount?


Present value model
Stock pricing model
Equity pricing model
Capital gain model
Dividend growth model
   
Which on of the following statements is correct?


From a legal perspective, preferred stock is a form of corporate equity
All classes of stock must have equal voting rights per share
Common shareholders elect the directors while the shareholders vote on mergers and acquisitions
Dividends are tax-free income for individual investors
Shareholders prefer noncumulative dividends over cumulative dividends
   
If shareholders are granted preemptive right they will:

be given the choice of receiving dividends either in cash or in additional shares of stock
be paid dividends prior to preferred shareholders during the preemptive period
be entitled to two votes per share of stock
be able to choose the timing and amount of any future dividends
have priority in the purchase of any newly issued shares
   
Dexter inc. has a bond issue outstanding. The issue's indenture provision prohibits the
firm from redeeming the bonds during the first 3 years. The provision is referred to as the ____ provision.


safeguard
market
liquidity
deferred call
sinking fund
   
An efficient capital market is best defined as a market in which security prices reflect which on one of the following?


Current inflation
A risk premium
Available Information
The historical arithmetic rate of return
   
When valuing a stock using the constant-growth model, D1 represents the:
 
the next expected annual dividend.
   
The dividend yield is defined as:
 
next year's expected dividend divided by the current market price per share.
   
The capital gains yield equals which one of the following?
 
Dividend growth rate
   
Mary owns 100 shares of stock. Each share entitles her to one vote per open seat on the board of directors.
Assume there are three open seats in the current election and Mary casts all 300 of her votes for a single candidate.
What is the term used to describe this type of voting?
 
Cumulative
   
Kate could not attend the last shareholders' meeting and thus she granted the authority to vote on her behalf
to the managers of the firm. Which term applies to this granting of authority?
Proxy
   
Newly issued securities are sold to investors in which one of the following markets?
 
Primary
   
An agent who buys and sells securities from inventory is called a:
 
Dealer
   
Most trades on the NYSE are executed:
 
Electronically
   
The stream of customer instructions to buy and sell securities is called the:
 
order flow.
   
Which one of the following will increase the current value of a stock?
 
Increase in the capital gains yield
   
The price of a stock at Year 4 can be expressed as:
 
D5 / (R - g).
   
Delfino's expects to pay an annual dividend of $1.50 per share next year.
What is the anticipated dividend for Year 5 if the firm increases its dividend by 2 percent annually?
 
$1.50 × (1.02)⁴
   
The required return on a stock is equal to which one of the following if the dividend on the stock decreases
by a constant percent per year?
 
Dividend yield + Capital gains yield
   
Sugar Cookies will pay an annual dividend of $1.23 a share next year. The firm expects to increase this
dividend by 8 percent per year the following four years and then decrease the dividend growth to 2
percent annually thereafter.  Which one of the following is the correct computation of the dividend for Year 7?
 
($1.23) × (1.08)⁴ × (1.02)²
   
The dividend yield on a stock will increase if the:
 
stock price decreases.
   
The constant growth model can be used to value the stock of firms that have which type(s) of dividends?
 
Dividends that are either constant or change annually at a constant rate
   
Computing the present value of a growing perpetuity is most similar to computing the current value of which
one of the following?
 
Stock with a constant-growth dividend
   
If shareholders are granted a preemptive right they will:
 
have priority in the purchase of any newly issued shares.
   
On which one of the following dates do dividends become a liability of the issuer for accounting purposes?
 
On the date the board declares the dividend
   
Dividends are:
 
paid out of net income.
   
Which one of the following players on the floor of the NYSE is obligated to maintain a two-sided, orderly market for
a limited number of securities?
 
Designated market maker
   
The NYSE:
 
is in the business of attracting order flow.
   
NASDAQ is best described as:
 
an electronic network of securities dealers.
   
Companies can list their stock on which one of the following without having to meet listing requirements or
filing financial statements with the SEC?
 
Pink sheets
   
Triad common stock is selling for $27.80 a share and has a dividend yield of 2.8 percent. What is the dividend amount?
 
$0.78

Dividend =.028 × $27.80 = $.78
   
The Glass Ceiling paid an annual dividend of $1.64 per share last year and just announced that future dividends
will increase by 1.3 percent annually.
What is the amount of the expected dividend in Year 6?
 
$1.77
   
Sweet Treats pays a constant annual dividend of $2.38 a share and currently sells for $52.60 a share.
What is the rate of return?
 
4.52 percent
   
The common stock of GT Enterprises is selling for $63.09 a share.  The company pays a constant annual
dividend and has a total return of 11.64 percent. What is the amount of the dividend?
 
$7.34
   
Solar Energy will pay an annual dividend of $1.93 per share next year.
The company just announced that future dividends will be increasing by 1.6 percent annually.
How much are you willing to pay for one share of this stock if you require a rate of return of 11.75 percent?
 
$19.01
   
The common stock of Up-Towne Movers sells for $33 a share, has a rate of return of 11.4 percent,
and a dividend growth rate of 2 percent annually. What was the amount of the last annual dividend paid?
 
$3.04

 
Dry Dock Marina is expected to pay an annual dividend of $1.58 next year.
The stock is selling for $18.53 a share and has a total return of 9.48 percent. What is the dividend growth rate?
 
0.95%
   
Best Ever Toys just paid its annual dividend of $1.78 per share. The required return is10.6 percent and the
dividend growth rate is 1.23 percent.  What is the expected value of this stock five years from now?
 
$20.44
   
This morning, you purchased a stock that will pay an annual dividend of $1.90 per share next year.
You require a 12 percent rate of return and the dividend increases at 3.5 percent annually.
What will your capital gain be in dollars on this stock if you sell it three years from now?
 
$2.43
   
Horseshoe Stables is losing significant market share and thus its managers have decided to decrease the firm's annual dividend.
The last annual dividend was $.86 a share but all future dividends will be decreased by 3.5 percent annually.
What is a share of this stock worth today at a required return of 17.8 percent?
 
$3.90
   
Lamey Gardens has a dividend growth rate of 5.6 percent, a market price of $13.16 a share, and a required return of 14 percent.
What is the amount of the last dividend this company paid?
 
$1.05
   
The common stock of Sweet Treats has a total return of 11.62 percent, a stock price of $48.20, and recently
paid an annual dividend of $2.38.  What is the capital gains rate if the company maintains a constant dividend?
 
6.68%
   
The Sports Club plans to pay an annual dividend of $1.20 per share next year, $1.12 per share a year for the following
two years,  and then a final liquidating dividend of $14.20 per share four years from now. How much is one share of
this stock worth to you today  if you require a rate of return of 18.7 percent of this risky investment?
 
$9.63
   
Atlas Home Supply has paid a constant annual dividend of $2.40 a share for the past 15 years.
Yesterday, the firm announced the dividend will increase next year by 10 percent and will stay at that level through Year 3,
after which time the dividends will increase by 2 percent annually. The required return on this stock is 12 percent.
What is the current value per share?
 
$25.51
   
The Fish House is expected to pay annual dividends of $1.23 and $1.25 at the end of the next two years, respectively.
After that, the company expects to pay a constant dividend of $1.35 a share. What is the value of this stock at a
required return of 16.4 percent?
 
$8.05
   
The Impulse Shopper recently paid an annual dividend of $1.13 per share.
The company just announced that it is suspending all dividend payments on its common stock for the next five years.
After that, the company expects to pay $.50 a share at the end of each year. At a required return of 18 percent,
what is this stock worth today?
 
$1.21
   
Business Solutions is expected to pay its first annual dividend of $.84 per share in Year 3.
Starting in Year 6, the company plans to increase the dividend by 2 percent per year.
What is the value of this stock today, Year 0, at a required return of 14.4 percent?
 
$5.01
   
Nu-Tek is expanding rapidly. As a result, the company expects to pay annual dividends of $.62, .80, and $1.05 per
share over the next three years,  respectively. After that, the dividend is projected to increase by 4 percent annually.
What is the current value of this stock if the required return is 16 percent?
 
$7.63
   
Toy Mart recently announced that it will pay annual dividends at the end of the next two years of $1.60 and $1.10 per
share, respectively. Then, in Year 5 it plans to pay a final dividend of $13.50 a share before closing its doors permanently.
At a required return of 13.5 percent, what should this stock sell for today?
 
$9.43
   
Dixie Mart plans to pay dividends of $1.36, $1.15, $1.35, and $.40 at the end of the next four years, respectively.
After that, the company will be sold and shareholders are expected to receive $82.40 per share in Year 6 when
the sale should be finalized. If the required return is 11.4 percent, what is the current value of one share of this stock?
 
$46.50

 
The Three Amigos just paid an annual dividend of $.60 per share but plans to double that amount each year for three years.
After that, the firm expects to maintain a constant dividend.
What is the value of this stock today if the required return is 15 percent?
 
$27.05
   
Village East expects to pay an annual dividend of $1.40 per share next year, and $1.68 per share for the following two years.
After that, the company plans to increase the dividend by 3.4 percent annually.
What is this stock's current value at a discount rate of 13.7 percent?
 
$15.15


   
The required return on Mountain Brook stock is 13.8 percent and the dividend growth rate is 3.64 percent.
The stock is currently selling for $32.80 a share. What is the dividend yield?
 
10.16%
   
For the past six years, the price of Slippery Rock stock has been increasing at a rate of 8.21 percent a year.
Currently, the stock is  priced at $43.40 a share and has a required return of 11.65 percent.
What is the dividend yield?
 
3.44%

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