 |
1 | |
In the primary market which of these securities would you be able to purchase? |
| | A) | bonds near maturity |
| | B) | newly issued shares of common stock |
| | C) | previously issued shares of common stock |
| | D) | bonds with at least ten years until maturity |
|
|
2 | |
If a stock's earnings are $3 per year and its P/E ratio is 13.5, then what is the stock's current price? |
| | A) | $121.50 |
| | B) | $40.50 |
| | C) | $13.50 |
| | D) | $4.50 |
|
|
3 | |
The book value of a firm's equity is determined by: |
| | A) | the difference between book values of assets and liabilities. |
| | B) | Multiplying share price by shares outstanding. |
| | C) | Multiplying share price at issue by shares outstanding. |
| | D) | The difference between market values of assets and liabilities. |
|
|
4 | |
If Company X has 350,000 shares of stock outstanding, $7 million in balance-sheet equity, and a price/book value ratio of 3, then what is the current price for a share for its stock? |
| | A) | $66.66 |
| | B) | $60.00 |
| | C) | $45.00 |
| | D) | $4.50 |
|
|
5 | |
If the liquidation value of a firm is negative, then: |
| | A) | the firm's debt exceeds the book value of the equity. |
| | B) | The book value of assets exceeds the firm's debt. |
| | C) | The market value of assets exceeds the firm's debt. |
| | D) | The firm's debt exceeds the market value of assets. |
|
|
6 | |
Which of the following is least likely to account for an excess of market value over book value of equity? |
| | A) | High rate of return on assets. |
| | B) | Inaccurate depreciation methods. |
| | C) | Valuable off-balance sheet assets. |
| | D) | The presence of growth opportunities. |
|
|
7 | |
A stock expected to pay an annual dividend of $7 next year sells now for $68 and has an expected return of 12%. What might investors expect to pay for the stock one year from now if the stock has a constant growth rate? |
| | A) | $52.84 |
| | B) | $64.84 |
| | C) | $69.16 |
| | D) | $83.16 |
|
|
8 | |
The expected return on common stock is composed of: |
| | A) | both dividend yield and capital appreciation. |
| | B) | Capital appreciation minus the dividend yield. |
| | C) | Capital appreciation. |
| | D) | Dividend yield. |
|
|
9 | |
How is it possible to ignore cash dividends that occur far into the future when using a dividend discount model? Those dividends: |
| | A) | will not be paid by the firm. |
| | B) | Ignore the tax consequences of future dividends. |
| | C) | Will be paid by a different investor. |
| | D) | Have an insignificant present value. |
|
|
10 | |
If the dividend yield for year one is expected to be 6% based on the current stock price of $30, what will the year five dividend be if dividends grow at a constant 4%? |
| | A) | $1.95 |
| | B) | $2.02 |
| | C) | $2.19 |
| | D) | $2.22 |
|
|
11 | |
What should be the price of a common stock paying $3.78 annually in dividends if the growth rate is zero and the discount rate is 7%? |
| | A) | $54.27 |
| | B) | $54.00 |
| | C) | $53.73 |
| | D) | $50.22 |
|
|
12 | |
What rate of return is expected from a stock that sells for $35 per share, just paid an annual dividend of $1.75, and is to sell for $37.50 per share in one year? |
| | A) | 10.05% |
| | B) | 12.14% |
| | C) | 14.15% |
| | D) | 16.25% |
|
|
13 | |
What is the return on equity for a firm that has a constant dividend growth rate of 6% and a payout ratio of 70%? |
| | A) | 20% |
| | B) | 16% |
| | C) | 8% |
| | D) | 4% |
|
|
14 | |
If all of the following firms have a required return of 14%, which would you expect to have a positive present value of growth opportunities? |
| | A) | a firm with a E/P ratio of 20% |
| | B) | a firm with a P/E ratio of 8 |
| | C) | a firm with a P/E ratio of 9 |
| | D) | All of the above firms are expected to have positive PVGO |
|
|
15 | |
If the stock market is semi-strong form efficient, which of the following would generate abnormally higher returns? |
| | A) | Technical analysis |
| | B) | Fundamental analysis |
| | C) | Insider trading |
| | D) | None of the above |
|