Student Centre | Instructor Centre | Information Centre | Home

Fundamentals of Corporate Finance, 4/c/e

Fundamentals of Corporate Finance, 4/e

Stephen A. Ross, Massachusetts Institute of Technology
Randolph W. Westerfield, University of Southern California
Bradford D. Jordan, University of Kentucky
Gordon S. Roberts, York University

Stock Valuation

Quick Quiz 2

After taking this quiz, click 'Submit Answers' for graded results. You'll also have the option of emailing the results to your instructor and/or yourself.


1	Which of the following terms is typically associated with BOTH preferred stock and common stock?
		A)	Dividend yield
		B)	Voting rights
		C)	Proxy
		D)	Arrearage
		E)	Cumulative voting


2	Dividends on the common stock of Stable Inc. are expected to grow at a constant rate forever. If you are told Stable's most recent dividend paid, its dividend growth rate, and a discount rate, you can compute. I. the price today II. the price five years from now III. the dividend that is expected to be paid ten years from now
		A)	I, II and III
		B)	I and II only
		C)	I and III only
		D)	II and III only
		E)	I only


3	A stock that pays a constant dividend of $2.50 forever currently sells for $20.00. What is the required rate of return?
		A)	13.0%
		B)	12.5%
		C)	12.0%
		D)	11.5%
		E)	11.0%


4	What would you pay today for a stock that is expected to make a $1.50 dividend in one year if the expected dividend growth rate is 3% and you require a 16% return on your investment?
		A)	$14.30
		B)	$12.33
		C)	$12.43
		D)	$13.14
		E)	$11.54


5	The stock of MTY Golf World currently sells for $133.75 per share. The firm has a constant dividend growth rate of 7% and just paid a dividend of $6.25. If the required rate of return is 12%, what will the stock sell for one year from now?
		A)	$127.06
		B)	$133.75
		C)	$143.11
		D)	$149.80
		E)	$152.78


6	The current price of XYZ stock is $50.00. Dividends are expected to grow at 7% indefinitely and the most recent dividend was $1. What is the required rate of return on XYZ stock?
		A)	9.0%
		B)	10.6%
		C)	9.3%
		D)	9.1%
		E)	11.2%


7	If Big Amp, Inc. stock closed at $22 and the current quarterly dividend is $1.25 per share, what dividend yield would be reported for the stock in the National Post?
		A)	22.7%
		B)	6.5%
		C)	9.1%
		D)	22.2%
		E)	5.7%


8	McIver's Meals, Inc. currently pays a $1.00 annual dividend. Investors believe that dividends will grow at 15% next year, 10% annually for the two years after that, and 5% annually thereafter. Assume the required return is 10%. What is the current market price of the stock?
		A)	$21.77
		B)	$22.99
		C)	$25.09
		D)	$26.13
		E)	$27.65


9	Boomer Products, Inc. manufactures "no-inhale" cigarettes. As their target customers age and pass on, sales of the product are expected to decline. Thus, demographics suggest that earnings and dividends will decline at a rate of 4% annually forever. The firm just paid a dividend of $2.50; given a required return of 12%, the stock should today should sell for:
		A)	$16.25
		B)	$15.00
		C)	$12.50
		D)	$10.25
		E)	$32.50


10	Etling Inc.'s dividend is expected to grow at 6% for the next 2 years and then at 3% forever. If the current dividend is $3 and the required return is 16%, what is the price of the stock?
		A)	$25.09
		B)	$25.82
		C)	$26.15
		D)	$27.58
		E)	$29.45

2002 McGraw-Hill Higher Education
Any use is subject to the Terms of Use and Privacy Policy.
McGraw-Hill Higher Education is one of the many fine businesses of The McGraw-Hill Companies.