Chap006
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Chap006

Course Number: ECONOMIC 650, Spring 2012

College/University: Pitt. State

Word Count: 16255

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Chapter 06 - Stock Valuation Chapter 06 Stock Valuation Multiple Choice Questions 1. An asset characterized by cash flows that increase at a constant rate forever is called a: A. preferred stock. B. growing annuity. C. common annuity. D. perpetuity due. E. growing perpetuity. 2. The stock valuation model that determines the current stock price by dividing the next annual dividend amount by the excess of the...

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06 Chapter - Stock Valuation Chapter 06 Stock Valuation Multiple Choice Questions 1. An asset characterized by cash flows that increase at a constant rate forever is called a: A. preferred stock. B. growing annuity. C. common annuity. D. perpetuity due. E. growing perpetuity. 2. The stock valuation model that determines the current stock price by dividing the next annual dividend amount by the excess of the discount rate less the dividend growth rate is called the _____ model. A. zero growth B. dividend growth C. capital pricing D. earnings capitalization E. differential growth 3. Next year's annual dividend divided by the current stock price is called the: A. yield to maturity. B. total yield. C. dividend yield. D. capital gains yield. E. earnings yield. 4. The rate at which a stock's price is expected to appreciate (or depreciate) is called the _____ yield. A. current B. total C. dividend D. capital gains E. earnings 6-1 Chapter 06 - Stock Valuation 5. A form of equity which receives preferential treatment in the payment of dividends is called _____ stock. A. preferred B. cumulative C. common D. dual class E. deferred 6. A _____ is a form of equity security that has a stated liquidating value. A. debenture B. bond C. preferred stock D. common stock E. proxy 7. A form of equity which receives no preferential treatment in either the payment of dividends or in bankruptcy distributions is called _____ stock. A. preferred B. common C. deferred D. dual class E. cumulative 8. The voting procedure whereby shareholders may cast all of their votes for one member of the board is called _____ voting. A. democratic B. cumulative C. straight D. deferred E. proxy 6-2 Chapter 06 - Stock Valuation 9. The voting procedure where you must own 50% plus one of the outstanding shares of stock to guarantee that you will win a seat on the board of directors is called _____ voting. A. proxy B. cumulative C. deferred D. straight E. democratic 10. The voting procedure where a shareholder grants authority to another individual to vote his/her shares is called _____ voting. A. proxy B. deferred C. straight D. cumulative E. democratic 11. Preemptive rights refer to the right of shareholders to: A. share proportionately in dividends paid. B. override the votes of other shareholders. C. vote at annual shareholder meetings. D. share proportionately in liquidated assets. E. share proportionately in any new stock issues sold. 12. Payments made by a corporation to its shareholders, in the form of either cash, stock or payments in kind, are called: A. retained earnings. B. net income. C. dividends. D. redistributions. E. infused equity. 6-3 Chapter 06 - Stock Valuation 13. The market in which new securities are originally sold to investors is called the _____ market. A. dealer B. auction C. over-the-counter D. secondary E. primary 14. The market in which previously issued securities are traded among investors is called the _____ market. A. primary B. auction C. secondary D. over-the-counter E. dealer 15. An agent who buys and sells securities from inventory is called a: A. broker. B. dealer. C. principal. D. capitalist. E. trader. 16. An agent who arranges security transactions among investors without maintaining an inventory is called a: A. broker. B. trader. C. capitalist. D. principal. E. dealer. 6-4 Chapter 06 - Stock Valuation 17. The owner of a seat on the New York Stock Exchange is called a(n) _____ of the exchange. A. member B. friend C. dealer D. trustee E. agent 18. A member of the New York Stock Exchange acting as a dealer in one or more securities on the exchange floor is called a: A. floor trader. B. floor post. C. specialist. D. floor broker. E. commission broker. 19. A member of the New York Stock Exchange who executes orders for commission brokers on a fee basis is a: A. floor trader. B. dealer. C. specialist. D. floor broker. E. floor agent. 20. A member of the New York Stock Exchange who executes buy and sell orders directly from customers once transmitted to the exchange floor is called a: A. dealer. B. floor trader. C. commission broker. D. floor broker. E. specialist 6-5 Chapter 06 - Stock Valuation 21. A member of the New York Stock Exchange who trades for his or her own account, trying to anticipate temporary price fluctuations, is called a(n): A. specialist. B. floor broker. C. floor trader. D. exchange customer. E. commission broker. 22. The electronic system used by the New York Stock Exchange which enables orders to be transmitted directly to a specialist is called the ______ system. A. Instinet B. Internet C. NASDAQ D. SuperDOT E. brokerage 23. The ________ has a multiple market maker system rather than a specialist system. A. NASDAQ B. NIKKEI C. NYSE D. AMEX E. None of the above. 24. A securities market primarily comprised of dealers who buy and sell for their own inventories is generally referred to as a(n) ______ market. A. private B. auction C. electronic network D. regional E. over-the-counter 6-6 Chapter 06 - Stock Valuation 25. Electronic communications networks, or ECNs, act to: A. increase the cost to invest. B. increase competition. C. increase liquidity. D. A & B. E. B & C. 26. The James River Co. pays an annual dividend of $1.50 per share on its common stock. This dividend amount has been constant for the past 15 years and is expected to remain constant. Given this, one share of James River Co. stock: A. is basically worthless as it offers no growth potential. B. is valued with an assumed growth rate of 3%. C. has a market value of $15.00. D. has a market value equal to the present value of $1.50 paid one year from today. E. is valued as if the dividend paid is a perpetuity. 27. The common stock of the Kenwith Co. pays a constant annual dividend. Thus, the market price of Kenwith stock will: A. decrease when the market rate of return increases. B. increase when the market rate of return increases. C. decrease over time. D. increase over time. E. always remain constant. 28. The Koster Co. currently pays an annual dividend of $1.00 and plans on increasing that amount by 5% each year. The Keyser Co. currently pays an annual dividend of $1.00 and plans on increasing its dividend by 3% annually. Given this, it can be stated with certainty that the _____ of the Koster Co. stock is greater than the _____ of the Keyser Co. stock. A. market price; market price B. total return; total return C. dividend yield; dividend yield D. capital gains; dividend yield E. None of the above. 6-7 Chapter 06 - Stock Valuation 29. The constant dividend growth model: I. assumes that dividends increase at a constant rate forever. II. can be used to compute a stock price at any point in time. III. states that the market price of a stock is only affected by the amount of the dividend. IV. considers capital gains but ignores the dividend yield. A. I only B. II only C. III and IV only D. I and II only E. I, II, and III only 30. The underlying assumption of the dividend growth model is that a stock is worth: A. the present value of the future income that the stock generates. B. the same amount to every investor regardless of his desired rate of return. C. an amount computed as the next annual dividend divided by the market rate of return. D. an amount computed as the next annual dividend divided by the required rate of return. E. the same amount as any other stock that pays the same current dividend and has the same required rate of return. 31. Assume that you are using the dividend growth model to value stocks. If you expect the market rate of return to increase across the board on all equity securities, then you should also expect the: A. market values of all stocks to increase, all else constant. B. market values of all stocks to remain constant as the dividend growth will offset the increase in the market rate. C. dividend growth rates to increase to offset this change. D. stocks that do not pay dividends to decrease in price while the dividend-paying stocks maintain a constant price. E. market values of all stocks to decrease, all else constant. 6-8 Chapter 06 - Stock Valuation 32. Latcher's Inc. is a relatively new firm that is still in a period of rapid development. The company plans on retaining all of its earnings for the next six years. Seven years from now, the company projects paying an annual dividend of $.25 a share and then increasing that amount by 3% annually thereafter. To value this stock as of today, you would most likely determine the value of the stock _____ years from today before determining today's value. A. 4 B. 5 C. 6 D. 7 E. 8 33. The Robert Phillips Co. currently pays no dividend. The company is anticipating dividends of $0, $0, $0, $.10, $.20, and $.30 over the next 6 years, respectively. After that, the company anticipates increasing the dividend by 4% annually. The first step in computing the value of this stock today, is to compute the value of the stock when it reaches constant growth in year: A. 3 B. 4 C. 5 D. 6 E. 7 34. Differential growth refers to a firm that increases its dividend by: A. three or more percent per year. B. $.10 or more per year. C. a constant rate of two or more percent per year. D. an amount in excess of $.15 year. E. a rate which is most likely not sustainable over an extended period of time. 6-9 Chapter 06 - Stock Valuation 35. The total rate of return earned on a stock is composed of which two of the following? I. current yield II. yield to maturity III. dividend yield IV. capital gains yield A. I and II only B. I and IV only C. II and III only D. II and IV only E. III and IV only 36. The total rate of return on a stock can be positive even when the price of the stock depreciates because of the: A. capital appreciation. B. real rate of return. C. interest yield. D. supernormal growth. E. dividend yield. 37. Fred Flintlock wants to earn a total of 10% on his investments. He recently purchased shares of ABC stock at a price of $20 a share. The stock pays a $1 a year dividend. The price of ABC stock needs to _____ if Fred is to achieve his 10% rate of return. A. remain constant B. decrease by 5% C. increase by 5% D. increase by 10% E. increase by 15% 38. Which one of the following correctly defines the constant dividend growth model? A. R = (D1 P0) + g B. P0 = (D1 R) + g C. R = (P0 D0) + g D. P0 = D0 (R-g) E. D0 = P0 (R-g) 6-10 Chapter 06 - Stock Valuation 39. Shareholders generally have the right to: I. elect the corporate directors. II. select the senior management of the firm. III. elect the chief executive officer (CEO). IV. elect the chief operating officer (COO). A. I only B. I and III only C. II only D. I and II only E. III and IV only 40. Jack owns 35 shares of stock in Beta, Inc. and wants to exercise as much control as possible over the company. Beta, Inc. has a total of 100 shares of stock outstanding. Each share receives one vote. Presently, the company is voting to elect two new directors. Which one of the following statements must be true given this information? A. If straight voting applies, Jack is assured one seat on the board. B. If straight voting applies, Jack can control both open seats. C. If cumulative voting applies, Jack is assured one seat on the board. D. If cumulative voting applies, Jack can control both open seats. E. Regardless of the type of voting employed, Jack does not own enough shares to control any of the seats. 41. ABC Co. is owned by a group of shareholders who all vote independently and who all want personal control over the firm. If straight voting is utilized, a shareholder: A. must either own enough shares to totally control the elections or else he/she has no control whatsoever. B. will be able to elect at least one director as long as there are at least three open positions and the shareholder owns at least 25% plus one of the outstanding shares. C. must own at least two-thirds of the shares, plus one, to exercise control over the elections. D. is only permitted to elect one director, regardless of the number of shares owned. E. who owns more shares than anyone else, regardless of the percentage of outstanding shares owned, will control the elections. 6-11 Chapter 06 - Stock Valuation 42. The Zilo Corp. has 1,000 shareholders and is preparing to elect three new board members. You do not own enough shares to control the elections but are determined to oust the current leadership. The most likely result of this situation is a: A. negotiated settlement where you are granted control over one of the three open positions. B. legal battle for control of the firm based on your discontent as an individual shareholder. C. arbitrated settlement whereby you are granted control over one of the three open positions. D. total loss of power for you since you are a minority shareholder. E. proxy fight for control of the firm. 43. Common stock shareholders are generally granted rights which include the right to: I. share in company profits. II. vote for company directors. III. vote on proposed mergers. IV. residual assets in a liquidation. A. I and II only B. II and III only C. I and IV only D. I, II, and IV only E. I, II, III, and IV 44. The Scott Co. has a general dividend policy whereby it pays a constant annual dividend of $1 per share of common stock. The firm has 1,000 shares of stock outstanding. The company: A. must always show a current liability of $1,000 for dividends payable. B. is obligated to continue paying $1 per share per year. C. must still declare each dividend before it becomes an actual company liability. D. has a liability which must be paid at a later date should the company miss paying an annual dividend payment. E. will be declared in default and can face bankruptcy if it does not pay $1 per year to each shareholder on a timely basis. 6-12 Chapter 06 - Stock Valuation 45. The dividends paid by a corporation: I. to an individual become taxable income of that individual. II. reduce the taxable income of the corporation. III. are declared by the chief financial officer of the corporation. IV. to another corporation may or may not represent taxable income to the recipient. A. I only B. I and IV only C. II and III only D. I, II, and IV only E. I, III, and IV only 46. The owner of preferred stock: A. has the right to declare the company bankrupt whenever there are insufficient funds to pay dividends to the common shareholders. B. has the right to veto the outcome of an election held by the common shareholders. C. is entitled to a distribution of income prior to the common shareholders. D. has the right to collect payment on any unpaid dividends as long as the stock is noncumulative preferred. E. receives tax-free dividends if he is an individual and owns more than 20% of the outstanding preferred shares. 47. A 8% preferred stock priced at $100 per share should pay _____ a year in dividends per share. A. $3 B. $6 C. $8 D. $30 E. $60 6-13 Chapter 06 - Stock Valuation 48. Which one of the following statements concerning preferred stock is correct? A. Unpaid preferred dividends are a liability of the firm. B. Preferred dividends must be paid quarterly provided the firm has net income that exceeds the amount of the quarterly dividend. C. Preferred dividends must be paid timely each quarter or the unpaid dividends start accruing interest. D. All unpaid dividends on preferred stock, regardless of the type of preferred, must be paid before any income can be distributed to common shareholders. E. Preferred shareholders may be granted voting rights and seats on the board if preferred dividend payments remain unpaid. 49. In a liquidation, each share of 5% preferred stock is generally entitled to a liquidation payment of _____ as long as there are sufficient funds available. A. $1 B. $5 C. $10 D. $50 E. $100 50. The value of common stock today depends on A. the expected future holding period and the discount rate. B. the expected future dividends and the capital gains. C. the expected future dividends, capital gains and the discount rate. D. the expected future holding period and capital gains. E. None of the above. 51. Which one of the following transactions occurs in the primary market? A. The repurchase of GHI stock from Tim by GHI B. The tax-free gift of DEF stock to Heather by Jennifer C. The sale of ABC stock by Fred Jones to Mary Smith D. The transfer of MNO stock from Tom to his son, Jon E. The initial sale of JKL stock by JKL to Jamie 6-14 Chapter 06 - Stock Valuation 52. Which one of the following statements concerning dealers and brokers is correct? A. A dealer in market securities arranges sales between buyers and sellers for a fee. B. A dealer in market securities pays the asked price when purchasing securities. C. A broker in market securities earns income in the form of a bid-ask spread. D. A broker does not take ownership of the securities being traded. E. A broker deals solely in the primary market. 53. The formula P0 = DIV/r represents A. the present value of a stream of zero growth dividends in perpetuity. B. the value of a no growth dividend stream. C. a lower value than if a positive growth element was included. D. All of the above. E. None of the above. 54. The post is a stationary position on the floor of the New York Stock Exchange where a _____ is assigned to work. A. floor trader B. dealer C. specialist D. commission broker E. floor broker 55. The closing price of a stock is quoted at 22.87, with a P/E of 26 and a net change of 1.42. Based on this information, which one of the following statements is correct? A. The closing price on the previous day was $1.42 higher than today's closing price. B. A dealer will buy the stock at $22.87 and sell it at $26 a share. C. The stock increased in value between yesterday's close and today's close by $.0142. D. The earnings per share are equal to 1/26th of $22.87. E. The earnings per share have increased by $1.42 this year. 6-15 Chapter 06 - Stock Valuation 56. A stock listing contains the following information: P/E 17.5, closing price 33.10, dividend .80, YTD% chg 3.4, and net chg of -.50. Which of the following statements are correct given this information? I. The stock price has increased by 3.4% during the current year. II. The closing price on the previous trading day was $32.60. III. The earnings per share are approximately $1.89. IV. The current yield is 17.5%. A. I and II only B. I and III only C. II and III only D. III and IV only E. I, III, and IV only 57. The discount rate in equity valuation is composed entirely of: A. the dividend yield and the growth rate. B. the dividends paid and the capital gains yield. C. the dividends paid and the growth rate. D. the capital gains earned and the dividends paid. E. the capital gains earned and the growth rate. 58. The net present value of a growth opportunity, NPVGO, can be defined as A. the initial investment necessary for a new project. B. the net present value per share of an investment in a new project. C. a continual reinvestment of earnings when r < g. D. a single period investment when r > g. E. None of the above. 6-16 Chapter 06 - Stock Valuation 59. Angelina's made two announcements concerning its common stock today. First, the company announced that its next annual dividend has been set at $2.20 a share. Secondly, the company announced that all future dividends will increase by 5% annually. What is the maximum amount you should pay to purchase a share of Angelina's stock if your goal is to earn a 10% rate of return? A. $31.60 B. $32.46 C. $37.44 D. $44.00 E. $46.51 60. How much are you willing to pay for one share of stock if the company just paid an $.80 annual dividend, the dividends increase by 4% annually and you require an 8% rate of return? A. $19.23 B. $20.00 C. $20.40 D. $20.80 E. $21.63 61. Lee Hong Imports paid a $1.00 per share annual dividend last week. Dividends are expected to increase by 5% annually. What is one share of this stock worth to you today if the appropriate discount rate is 14%? A. $7.14 B. $7.50 C. $11.11 D. $11.67 E. $12.25 6-17 Chapter 06 - Stock Valuation 62. Majestic Homes stock traditionally provides an 8% rate of return. The company just paid a $2 a year dividend which is expected to increase by 5% per year. If you are planning on buying 1,000 shares of this stock next year, how much should you expect to pay per share if the market rate of return for this type of security is 9% at the time of your purchase? A. $48.60 B. $52.50 C. $55.13 D. $57.89 E. $70.00 63. Leslie's Unique Clothing Stores offers a common stock that pays an annual dividend of $2.00 a share. The company has promised to maintain a constant dividend. How much are you willing to pay for one share of this stock if you want to earn 12% return on your equity investments? A. $10.00 B. $13.33 C. $16.67 D. $18.88 E. $20.00 64. Martin's Yachts has paid annual dividends of $1.40, $1.75, and $2.10 a share over the past three years, respectively. The company now predicts that it will maintain a constant dividend since its business has leveled off and sales are expected to remain relatively constant. Given the lack of future growth, you will only buy this stock if you can earn at least a 12% rate of return. What is the maximum amount you are willing to pay to buy one share of this stock today? A. $10.00 B. $13.33 C. $16.67 D. $17.50 E. $20.00 6-18 Chapter 06 - Stock Valuation 65. The common stock of Eddie's Engines, Inc. sells for $20.00 a share. The stock is expected to pay $1.80 per share next month when the annual dividend is distributed. Eddie's has established a pattern of increasing their dividends by 4% annually and expects to continue doing so. What is the market rate of return on this stock? A. 7% B. 9% C. 11% D. 13% E. 15% 66. The dividend yield on Alpha's common stock is 4.8%. The company just paid a $2.10 dividend. The rumor is that the dividend will be $2.205 next year. The dividend growth rate is expected to remain constant at the current level. What is the required rate of return on Alpha's stock? A. 10.04% B. 16.07% C. 21.88% D. 43.75% E. 45.94% 67. Martha's Vineyard recently paid a $3.60 annual dividend on its common stock. This dividend increases at an average rate of 4.5% per year. The stock is currently selling for $57.88 a share. What is the rate of return on the stock? A. 6.5% B. 7.5% C. 8.5% D. 9.0% E. 11.0% 6-19 Chapter 06 - Stock Valuation 68. Bet'R Bilt Bikes just announced that their annual dividend for this coming year will be $1.42 a share and that all future dividends are expected to increase by 2.5% annually. What is the market rate of return if this stock is currently selling for $14.20 a share? A. 9.5% B. 10.0% C. 12.5% D. 13.5% E. 15.0% 69. Shares of common stock of the Samson Co. offer an expected total return of 12%. The dividend is increasing at a constant 8% per year. The dividend yield must be: A. - 4%. B. 4%. C. 8%. D. 12%. E. 20%. 70. The common stock of Grady Co. had an 11.25% rate of return last year. The dividend amount was $.70 a share which equated to a dividend yield of 1.5%. What was the rate of price appreciation on the stock? A. 1.50% B. 8.00% C. 9.75% D. 11.25% E. 12.75% 71. Weisbro and Sons common stock sells for $21 a share and pays an annual dividend that increases by 5% annually. The market rate of return on this stock is 9%. What is the amount of the last dividend paid by Weisbro and Sons? A. $.77 B. $.80 C. $.84 D. $.87 E. $.88 6-20 Chapter 06 - Stock Valuation 72. The common stock of Energizer's pays an annual dividend that is expected to increase by 10% annually. The stock commands a market rate of return of 12% and sells for $55.00 a share. What is the expected amount of the next dividend to be paid on Energizer's common stock? A. $.90 B. $1.00 C. $1.10 D. $1.21 E. $1.33 73. The Reading Co. has adopted a policy of increasing the annual dividend on their common stock at a constant rate of 3.5% annually. The last dividend they paid was $0.95 a share. What will the company's dividend be in five years? A. $.90 B. $.93 C. $1.03 D. $1.13 E. $1.23 74. A stock pays a constant annual dividend and sells for $31.11 a share. If the dividend yield on this stock is 9%, what is the dividend amount? A. $1.40 B. $1.80 C. $2.20 D. $2.40 E. $2.80 75. You have decided that you would like to own some shares of GH Corp. but need an expected 12.5% rate of return to compensate for the perceived risk of such ownership. What is the maximum you are willing to spend per share to buy GH stock if the company pays a constant $3.40 annual dividend per share? A. $26.04 B. $26.87 C. $27.20 D. $28.29 E. $29.59 6-21 Chapter 06 - Stock Valuation 76. Turnips and Parsley common stock sells for $31.65 a share at a market rate of return of 9.5%. The company just paid their annual dividend of $1.20. What is the rate of growth of their dividend? A. 5.2% B. 5.5% C. 5.9% D. 6.0% E. 6.3% 77. B&K Enterprises will pay an annual dividend of $2.10 a share on its common stock next year. Last week, the company paid a dividend of $2.00 a share. The company adheres to a constant rate of growth dividend policy. What will one share of B&K common stock be worth ten years from now if the applicable discount rate is 9%? A. $71.16 B. $74.01 C. $76.97 D. $80.05 E. $85.52 78. Wilbert's Clothing Stores just paid a $1.25 annual dividend. The company has a policy whereby the dividend increases by 2% annually. You would like to purchase 100 shares of stock in this firm but realize that you will not have the funds to do so for another three years. If you desire a 12% rate of return, how much should you expect to pay for 100 shares when you can afford to buy this stock? Ignore trading costs. A. $1,040 B. $1,160 C. $1,353 D. $1,766 E. $1,810 6-22 Chapter 06 - Stock Valuation 79. The Merriweather Co. just announced that it is paying a dividend next year of $1.60 and is establishing a policy whereby the dividend will increase by 3.5% annually thereafter. How much will one share of this stock be worth five years from now if the required return is 12%? A. $21.60 B. $22.36 C. $23.14 D. $23.95 E. $24.79 80. Shares of the Katydid Co. common stock are currently selling for $33.60. The last dividend paid was $1.60 per share. The market rate of return is 10%. At what rate is the dividend growing? A. 3.50% B. 4.60% C. 5.00% D. 6.05% E. 6.91% 81. The Bell Weather Co. is a new firm in a rapidly growing industry. The company is planning on increasing its annual dividend by 20% a year for the next four years and then decreasing the growth rate to 5% per year. The company just paid its annual dividend in the amount of $1.00 per share. What is the current value of one share of this stock if the required rate of return is 10.25%? A. $33.04 B. $38.19 C. $41.05 D. $43.19 E. $45.81 6-23 Chapter 06 - Stock Valuation 82. The Extreme Reaches Corp. last paid a $1.50 per share annual dividend. The company is planning on paying $3.00, $5.00, $7.50, and $10.00 a share over the next four years, respectively. After that the dividend will be a constant $2.50 per share per year. What is the market price of this stock if the market rate of return is 14%? A. $17.04 B. $22.39 C. $26.57 D. $28.03 E. $33.71 83. Can't Hold Me Back, Inc. is preparing to pay its first dividends. It is going to pay $1.00, $2.50, and $5.00 a share over the next three years, respectively. After that, the company has stated that the annual dividend will be $1.25 per share indefinitely. What is this stock worth to you per share if you demand a 6% rate of return? A. $7.20 B. $14.48 C. $18.88 D. $24.85 E. $31.61 84. NU YU announced today that it will begin paying annual dividends. The first dividend will be paid next year in the amount of $.25 a share. The following dividends will be $.40, $.60, and $.75 a share annually for the following three years, respectively. After that, dividends are projected to increase by 3.5% per year. How much are you willing to pay to buy one share of this stock if your desired rate of return is 12%? A. $1.45 B. $5.80 C. $7.25 D. $9.06 E. $10.58 6-24 Chapter 06 - Stock Valuation 85. Now or Later, Inc. recently paid $1.10 as an annual dividend. Future dividends are projected at $1.14, $1.18, $1.22, and $1.25 over the next four years, respectively. After that, the dividend is expected to increase by 2% annually. What is one share of this stock worth to you if you require an 8% rate of return on similar investments? A. $15.62 B. $19.57 C. $21.21 D. $23.33 E. $25.98 86. The Red Bud Co. just paid a dividend of $1.20 a share. The company announced today that it will continue to pay this constant dividend for the next three years after which time it will discontinue paying dividends permanently. What is one share of this stock worth today if the required rate of return is 8%? A. $3.09 B. $3.15 C. $3.23 D. $3.44 E. $3.60 87. Bill Bailey and Sons pays no dividend at the present time. The company plans to start paying an annual dividend in the amount of $.30 a share for two years commencing two years from today. After that time, the company plans on paying a constant $1 a share dividend indefinitely. How much are you willing to pay to buy a share of this stock if your required return is 15%? A. $4.42 B. $4.81 C. $5.19 D. $5.36 E. $5.58 6-25 Chapter 06 - Stock Valuation 88. The Lighthouse Co. is in a downsizing mode. The company paid a $2.50 annual dividend last year. The company has announced plans to lower the dividend by $.50 a year. Once the dividend amount becomes zero, the company will cease all dividends permanently. You place a required rate of return of 16% on this particular stock given the company's situation. What is one share of this stock worth to you today? A. $3.76 B. $4.08 C. $4.87 D. $5.13 E. $5.39 89. Mother and Daughter Enterprises is a relatively new firm that appears to be on the road to great success. The company paid its first annual dividend yesterday in the amount of $.28 a share. The company plans to double each annual dividend payment for the next three years. After that time, it is planning on paying a constant $1.50 per share indefinitely. What is one share of this stock worth today if the market rate of return on similar securities is 11.5%? A. $9.41 B. $11.40 C. $11.46 D. $11.93 E. $12.43 90. BC n D just paid its annual dividend of $.60 a share. The projected dividends for the next five years are $.30, $.50, $.75, $1.00, and $1.20, respectively. After that time, the dividends will be held constant at $1.40. What is this stock worth today at a 6% discount rate? A. $20.48 B. $20.60 C. $21.02 D. $21.28 E. $21.43 6-26 Chapter 06 - Stock Valuation 91. Beaksley, Inc. is a very cyclical type of business that is reflected in its dividend policy. The firm pays a $2.00 a share dividend every other year. The last dividend was paid last year. Five years from now, the company is repurchasing all of the outstanding shares at a price of $55 a share. At an 9% rate of return, what is this stock worth today? A. $34.03 B. $37.21 C. $38.85 D. $44.09 E. $51.18 92. Last week, Railway Cabooses paid their annual dividend of $1.20 per share. The company has been reducing the dividends by 5% each year. How much are you willing to pay to purchase stock in this company if your required rate of return is 14%? A. $4.50 B. $6.00 C. $10.80 D. $12.67 E. $27.00 93. Nu-Tek, Inc. is expecting a period of intense growth, so it has decided to retain more of its earnings to help finance that growth. As a result it is going to reduce its annual dividend by 10% a year for the next three years. After that it will maintain a constant dividend of $.70 a share. Last year, the company paid $1.80 per share. What is the market value of this stock if the required rate of return is 13%? A. $6.79 B. $7.22 C. $8.22 D. $8.87 E. $9.01 6-27 Chapter 06 - Stock Valuation 94. The Double Dip Co. is expecting its ice cream sales to decline due to the increased interest in healthy eating. Thus, the company has announced that it will be reducing its annual dividend by 5% a year for the next two years. After that, Double Dip will maintain a constant dividend of $1 a share. Last year, the company paid $1.40 per share. What is this stock worth to you if you require a 9% rate of return? A. $10.86 B. $11.11 C. $11.64 D. $12.98 E. $14.23 95. Butterup's N More wants to offer some preferred stock that pays an annual dividend of $2.00 a share forever. The company has determined that stocks with similar characteristics provide a 10% rate of return. What price should Butterup's expect to receive per share for this stock offering? A. $18.35 B. $20.00 C. $21.80 D. $22.22 E. $24.22 96. The preferred stock of North Coast Shoreline pays an annual dividend of $1.60 and sells for $20.65 a share. What is the dividend yield on this security? A. 5.95% B. 7.75% C. 8.40% D. 11.90% E. 14.17% 6-28 Chapter 06 - Stock Valuation 97. Jim owns shares of Abco, Inc. preferred stock which he says provides him with a constant 6.58% rate of return. The stock is currently priced at $45.60 a share. What is the amount of the dividend per share? A. $3.00 B. $3.15 C. $3.50 D. $3.54 E. $3.62 98. You want to earn a 12% rate of return. Panco, Inc. preferred stock pays a $4.50 annual dividend. What is the maximum price you are willing to pay for one share of this stock? A. $32.50 B. $37.50 C. $39.00 D. $40.50 E. $45.00 99. Which of the following amounts is closest to what should be paid for Overland common stock? Overland has just paid a dividend of $2.25. These dividends are expected to grow at a rate of 5% in the foreseeable future. The risk of this company suggests that future cash flows should be discounted at a rate of 11%. A. $20.45 B. $21.48 C. $37.50 D. $39.38 E. $47.70 100. What would be the maximum an investor should pay for the common stock of a firm that has no growth opportunities but pays a dividend of $1.85 per year? The next dividend will be paid in exactly 1 year. The required rate of return is 14.5%. A. $9.52 B. $10.88 C. $12.76 D. $17.00 E. None of the above. 6-29 Chapter 06 - Stock Valuation 101. Mortgage Instruments Inc. is expected to pay dividends of $1.04 next year. The company just paid dividends of $1. This growth rate is expected to continue. How much should be paid for Mortgage Instruments stock just after the dividend if the appropriate discount rate is 6%? A. $20.00 B. $21.50 C. $34.75 D. $51.25 E. $52.00 102. The Felix Corp. projects to pay a dividend of $.75 next year and then have it grow at 12% for the following three years before growing at 8% indefinitely thereafter. The equity has a required return of 10% in the market. The price of the stock should be ___. A. $9.375 B. $17.05 C. $41.39 D. $59.80 E. $62.38 103. If a company paid a dividend of $0.50 last year and it is expected to grow at 7% for the next 8 years and then grow at 5% thereafter, the dividend expected in year 8 is __. A. $0.73 B. $0.75 C. $0.78 D. $0.79 E. $0.86 104. The Lory Company had net earnings of $127,000 this past year. Dividends of $38,100 were paid on the company's equity of $1,587,500. If Lory has 100,000 shares outstanding with a current market price of $11.625 per share, and the growth rate was 5.6% what is the required rate of return? A. 4.2% B. 6% C. 9% D. 14% E. None of the above. 6-30 Chapter 06 - Stock Valuation 105. Doctors-On-Call, a newly formed medical group, just paid a dividend of $.50. The company's dividends are expected to grow at a 20% rate for the next 5 years and at a 3% rate thereafter. What is the value of the stock if the appropriate discount rate is 12%? A. $8.08 B. $11.17 C. $14.22 D. $17.32 E. $30.90 106. A stock you are interested in paid a dividend of $1 last year. The anticipated growth rate in dividends and earnings is 20% for the next year and 10% the year after that before settling down to a constant 5% growth rate. The discount rate is 12%. Calculate the expected price of the stock. A. $17.20 B. $17.90 C. $18.20 D. $19.40 E. $19.75 107. A stock you are interested in paid a dividend of $1 last year. The anticipated growth rate in dividends and earnings is 25% for the next 2 years before settling down to a constant 5% growth rate. The discount rate is 12%. Calculate the expected price of the stock. A. $15.38 B. $20.50 C. $21.04 D. $22.27 E. $26.14 108. Which of the following values is closest to the amount that should be paid for a stock that will pay a dividend of $10 in one year and $11 in two years? The stock will be sold in 2 years for an estimated price of $120. The appropriate discount rate is 8%. A. $114.60 B. $119.40 C. $124.20 D. $121.57 E. $138.75 6-31 Chapter 06 - Stock Valuation 109. You want to earn a 12% rate of return. Panco, Inc. preferred stock pays a $6.75 annual dividend. What is the maximum price you are willing to pay for one share of this stock? A. $6.75 B. $52.54 C. $55.00 D. $56.25 E. $58.21 110. Which of the following amounts is closest to what should be paid for Ryan common stock? Ryan has just paid a dividend of $1.75. These dividends are expected to grow at a rate of 5% in the foreseeable future. The risk of this company suggests that future cash flows should be discounted at a rate of 12%. A. $18.75 B. $19.50 C. $22.50 D. $26.25 E. None of the above. 111. What would be the maximum an investor should pay for the common stock of a firm that has no growth opportunities but pays a dividend of $2.50 per year? The next dividend will be paid in exactly 1 year. The required rate of return is 11%. A. $19.52 B. $21.50 C. $22.73 D. $25.22 E. None of the above. 112. Ramchander Investment Group is expected to pay dividends of $1.40 next year. The company just paid dividends of $1.30. This growth rate is expected to continue. How much should be paid for Ramchander Investment Group stock just after the dividend if the appropriate discount rate is 10%? A. $14.00 B. $35.85 C. $58.90 D. $60.61 E. $65.27 6-32 Chapter 06 - Stock Valuation Essay Questions 113. List the four types of New York Stock Exchange members and give a brief definition of what each member does. 114. What are the primary differences between NASDAQ and the NYSE? 115. What are the components of the required rate of return on a share of stock? Briefly explain each component. 116. Briefly explain the differences between preferred and common stock. 6-33 Chapter 06 - Stock Valuation 117. Explain whether it is easier to find the required return on a publicly traded stock or a publicly traded bond, and explain why. 118. A number of publicly traded firms pay no dividends yet investors are willing to buy shares in these firms. How is this possible? Does this violate our basic principle of stock valuation? Explain. 119. A firm has two classes of common stock outstanding: Class A, which carries voting rights of 10 votes per share but receives no dividends (ever), and Class B, which carries voting rights of 1 vote per share and pays dividends whenever they are declared by the board. Which would you be willing to pay more for and why? 120. Are most stocks constant growth or differential growth? Why? 6-34 Chapter 06 - Stock Valuation Chapter 06 Stock Valuation Answer Key Multiple Choice Questions 1. An asset characterized by cash flows that increase at a constant rate forever is called a: A. preferred stock. B. growing annuity. C. common annuity. D. perpetuity due. E. growing perpetuity. Difficulty level: Easy Topic: Growing Perpetuity 2. The stock valuation model that determines the current stock price by dividing the next annual dividend amount by the excess of the discount rate less the dividend growth rate is called the _____ model. A. zero growth B. dividend growth C. capital pricing D. earnings capitalization E. differential growth Difficulty level: Easy Topic: Dividend Growth Model 3. Next year's annual dividend divided by the current stock price is called the: A. yield to maturity. B. total yield. C. dividend yield. D. capital gains yield. E. earnings yield. Difficulty level: Easy Topic: Dividend Yield 6-35 Chapter 06 - Stock Valuation 4. The rate at which a stock's price is expected to appreciate (or depreciate) is called the _____ yield. A. current B. total C. dividend D. capital gains E. earnings Difficulty level: Easy Topic: Capital Gains Yield 5. A form of equity which receives preferential treatment in the payment of dividends is called _____ stock. A. preferred B. cumulative C. common D. dual class E. deferred Difficulty level: Easy Topic: Preferred Stock 6. A _____ is a form of equity security that has a stated liquidating value. A. debenture B. bond C. preferred stock D. common stock E. proxy Difficulty level: Medium Topic: Preferred Stock 6-36 Chapter 06 - Stock Valuation 7. A form of equity which receives no preferential treatment in either the payment of dividends or in bankruptcy distributions is called _____ stock. A. preferred B. common C. deferred D. dual class E. cumulative Difficulty level: Easy Topic: Common Stock 8. The voting procedure whereby shareholders may cast all of their votes for one member of the board is called _____ voting. A. democratic B. cumulative C. straight D. deferred E. proxy Difficulty level: Easy Topic: Cumulative Voting 9. The voting procedure where you must own 50% plus one of the outstanding shares of stock to guarantee that you will win a seat on the board of directors is called _____ voting. A. proxy B. cumulative C. deferred D. straight E. democratic Difficulty level: Easy Topic: Straight Voting 6-37 Chapter 06 - Stock Valuation 10. The voting procedure where a shareholder grants authority to another individual to vote his/her shares is called _____ voting. A. proxy B. deferred C. straight D. cumulative E. democratic Difficulty level: Easy Topic: Proxy Voting 11. Preemptive rights refer to the right of shareholders to: A. share proportionately in dividends paid. B. override the votes of other shareholders. C. vote at annual shareholder meetings. D. share proportionately in liquidated assets. E. share proportionately in any new stock issues sold. Difficulty level: Medium Topic: Preemptive Rights 12. Payments made by a corporation to its shareholders, in the form of either cash, stock or payments in kind, are called: A. retained earnings. B. net income. C. dividends. D. redistributions. E. infused equity. Difficulty level: Easy Topic: Dividends 6-38 Chapter 06 - Stock Valuation 13. The market in which new securities are originally sold to investors is called the _____ market. A. dealer B. auction C. over-the-counter D. secondary E. primary Difficulty level: Easy Topic: Primary Market 14. The market in which previously issued securities are traded among investors is called the _____ market. A. primary B. auction C. secondary D. over-the-counter E. dealer Difficulty level: Easy Topic: Secondary Market 15. An agent who buys and sells securities from inventory is called a: A. broker. B. dealer. C. principal. D. capitalist. E. trader. Difficulty level: Easy Topic: Dealer 6-39 Chapter 06 - Stock Valuation 16. An agent who arranges security transactions among investors without maintaining an inventory is called a: A. broker. B. trader. C. capitalist. D. principal. E. dealer. Difficulty level: Easy Topic: Broker 17. The owner of a seat on the New York Stock Exchange is called a(n) _____ of the exchange. A. member B. friend C. dealer D. trustee E. agent Difficulty level: Easy Topic: Nyse Member 18. A member of the New York Stock Exchange acting as a dealer in one or more securities on the exchange floor is called a: A. floor trader. B. floor post. C. specialist. D. floor broker. E. commission broker. Difficulty level: Easy Topic: Specialist 6-40 Chapter 06 - Stock Valuation 19. A member of the New York Stock Exchange who executes orders for commission brokers on a fee basis is a: A. floor trader. B. dealer. C. specialist. D. floor broker. E. floor agent. Difficulty level: Easy Topic: Floor Broker 20. A member of the New York Stock Exchange who executes buy and sell orders directly from customers once transmitted to the exchange floor is called a: A. dealer. B. floor trader. C. commission broker. D. floor broker. E. specialist Difficulty level: Easy Topic: Commission Broker 21. A member of the New York Stock Exchange who trades for his or her own account, trying to anticipate temporary price fluctuations, is called a(n): A. specialist. B. floor broker. C. floor trader. D. exchange customer. E. commission broker. Difficulty level: Easy Topic: Floor Trader 6-41 Chapter 06 - Stock Valuation 22. The electronic system used by the New York Stock Exchange which enables orders to be transmitted directly to a specialist is called the ______ system. A. Instinet B. Internet C. NASDAQ D. SuperDOT E. brokerage Difficulty level: Easy Topic: Superdot System 23. The ________ has a multiple market maker system rather than a specialist system. A. NASDAQ B. NIKKEI C. NYSE D. AMEX E. None of the above. Difficulty level: Easy Topic: Order Flow 24. A securities market primarily comprised of dealers who buy and sell for their own inventories is generally referred to as a(n) ______ market. A. private B. auction C. electronic network D. regional E. over-the-counter Difficulty level: Easy Topic: Over-The-Counter Market 6-42 Chapter 06 - Stock Valuation 25. Electronic communications networks, or ECNs, act to: A. increase the cost to invest. B. increase competition. C. increase liquidity. D. A & B. E. B & C. Difficulty Medium Topic: level: ECNS 26. The James River Co. pays an annual dividend of $1.50 per share on its common stock. This dividend amount has been constant for the past 15 years and is expected to remain constant. Given this, one share of James River Co. stock: A. is basically worthless as it offers no growth potential. B. is valued with an assumed growth rate of 3%. C. has a market value of $15.00. D. has a market value equal to the present value of $1.50 paid one year from today. E. is valued as if the dividend paid is a perpetuity. Difficulty level: Easy Topic: Valuation of Zero Growth Stock 27. The common stock of the Kenwith Co. pays a constant annual dividend. Thus, the market price of Kenwith stock will: A. decrease when the market rate of return increases. B. increase when the market rate of return increases. C. decrease over time. D. increase over time. E. always remain constant. Difficulty level: Easy Topic: Valuation of Zero Growth Stock 6-43 Chapter 06 - Stock Valuation 28. The Koster Co. currently pays an annual dividend of $1.00 and plans on increasing that amount by 5% each year. The Keyser Co. currently pays an annual dividend of $1.00 and plans on increasing its dividend by 3% annually. Given this, it can be stated with certainty that the _____ of the Koster Co. stock is greater than the _____ of the Keyser Co. stock. A. market price; market price B. total return; total return C. dividend yield; dividend yield D. capital gains; dividend yield E. None of the above. Difficulty level: Medium Topic: Dividend Growth Model 29. The constant dividend growth model: I. assumes that dividends increase at a constant rate forever. II. can be used to compute a stock price at any point in time. III. states that the market price of a stock is only affected by the amount of the dividend. IV. considers capital gains but ignores the dividend yield. A. I only B. II only C. III and IV only D. I and II only E. I, II, and III only Difficulty level: Medium Topic: Dividend yield vs. Capital gains yield 30. The underlying assumption of the dividend growth model is that a stock is worth: A. the present value of the future income that the stock generates. B. the same amount to every investor regardless of his desired rate of return. C. an amount computed as the next annual dividend divided by the market rate of return. D. an amount computed as the next annual dividend divided by the required rate of return. E. the same amount as any other stock that pays the same current dividend and has the same required rate of return. Difficulty level: Medium Topic: Dividend Growth Model 6-44 Chapter 06 - Stock Valuation 31. Assume that you are using the dividend growth model to value stocks. If you expect the market rate of return to increase across the board on all equity securities, then you should also expect the: A. market values of all stocks to increase, all else constant. B. market values of all stocks to remain constant as the dividend growth will offset the increase in the market rate. C. dividend growth rates to increase to offset this change. D. stocks that do not pay dividends to decrease in price while the dividend-paying stocks maintain a constant price. E. market values of all stocks to decrease, all else constant. Difficulty level: Medium Topic: Dividend Growth Model 32. Latcher's Inc. is a relatively new firm that is still in a period of rapid development. The company plans on retaining all of its earnings for the next six years. Seven years from now, the company projects paying an annual dividend of $.25 a share and then increasing that amount by 3% annually thereafter. To value this stock as of today, you would most likely determine the value of the stock _____ years from today before determining today's value. A. 4 B. 5 C. 6 D. 7 E. 8 Difficulty level: Medium Topic: Differential Growth 6-45 Chapter 06 - Stock Valuation 33. The Robert Phillips Co. currently pays no dividend. The company is anticipating dividends of $0, $0, $0, $.10, $.20, and $.30 over the next 6 years, respectively. After that, the company anticipates increasing the dividend by 4% annually. The first step in computing the value of this stock today, is to compute the value of the stock when it reaches constant growth in year: A. 3 B. 4 C. 5 D. 6 E. 7 Difficulty level: Medium Topic: Differential Growth 34. Differential growth refers to a firm that increases its dividend by: A. three or more percent per year. B. $.10 or more per year. C. a constant rate of two or more percent per year. D. an amount in excess of $.15 year. E. a rate which is most likely not sustainable over an extended period of time. Difficulty level: Medium Topic: Differential Growth 35. The total rate of return earned on a stock is composed of which two of the following? I. current yield II. yield to maturity III. dividend yield IV. capital gains yield A. I and II only B. I and IV only C. II and III only D. II and IV only E. III and IV only Difficulty level: Medium Topic: Dividend Yield and Capital Gains 6-46 Chapter 06 - Stock Valuation 36. The total rate of return on a stock can be positive even when the price of the stock depreciates because of the: A. capital appreciation. B. real rate of return. C. interest yield. D. supernormal growth. E. dividend yield. Difficulty level: Medium Topic: Dividend Yield 37. Fred Flintlock wants to earn a total of 10% on his investments. He recently purchased shares of ABC stock at a price of $20 a share. The stock pays a $1 a year dividend. The price of ABC stock needs to _____ if Fred is to achieve his 10% rate of return. A. remain constant B. decrease by 5% C. increase by 5% D. increase by 10% E. increase by 15% Difficulty level: Medium Topic: Dividend Yield and Capital Gains 38. Which one of the following correctly defines the constant dividend growth model? A. R = (D1 P0) + g B. P0 = (D1 R) + g C. R = (P0 D0) + g D. P0 = D0 (R-g) E. D0 = P0 (R-g) Difficulty level: Medium Topic: Dividend Growth Model 6-47 Chapter 06 - Stock Valuation 39. Shareholders generally have the right to: I. elect the corporate directors. II. select the senior management of the firm. III. elect the chief executive officer (CEO). IV. elect the chief operating officer (COO). A. I only B. I and III only C. II only D. I and II only E. III and IV only Difficulty level: Medium Topic: Shareholder Rights 40. Jack owns 35 shares of stock in Beta, Inc. and wants to exercise as much control as possible over the company. Beta, Inc. has a total of 100 shares of stock outstanding. Each share receives one vote. Presently, the company is voting to elect two new directors. Which one of the following statements must be true given this information? A. If straight voting applies, Jack is assured one seat on the board. B. If straight voting applies, Jack can control both open seats. C. If cumulative voting applies, Jack is assured one seat on the board. D. If cumulative voting applies, Jack can control both open seats. E. Regardless of the type of voting employed, Jack does not own enough shares to control any of the seats. Difficulty level: Medium Topic: Cumulative Voting 6-48 Chapter 06 - Stock Valuation 41. ABC Co. is owned by a group of shareholders who all vote independently and who all want personal control over the firm. If straight voting is utilized, a shareholder: A. must either own enough shares to totally control the elections or else he/she has no control whatsoever. B. will be able to elect at least one director as long as there are at least three open positions and the shareholder owns at least 25% plus one of the outstanding shares. C. must own at least two-thirds of the shares, plus one, to exercise control over the elections. D. is only permitted to elect one director, regardless of the number of shares owned. E. who owns more shares than anyone else, regardless of the percentage of outstanding shares owned, will control the elections. Difficulty level: Medium Topic: Straight Voting 42. The Zilo Corp. has 1,000 shareholders and is preparing to elect three new board members. You do not own enough shares to control the elections but are determined to oust the current leadership. The most likely result of this situation is a: A. negotiated settlement where you are granted control over one of the three open positions. B. legal battle for control of the firm based on your discontent as an individual shareholder. C. arbitrated settlement whereby you are granted control over one of the three open positions. D. total loss of power for you since you are a minority shareholder. E. proxy fight for control of the firm. Difficulty level: Medium Topic: Proxy Voting 6-49 Chapter 06 - Stock Valuation 43. Common stock shareholders are generally granted rights which include the right to: I. share in company profits. II. vote for company directors. III. vote on proposed mergers. IV. residual assets in a liquidation. A. I and II only B. II and III only C. I and IV only D. I, II, and IV only E. I, II, III, and IV Difficulty level: Medium Topic: Shareholder Rights 44. The Scott Co. has a general dividend policy whereby it pays a constant annual dividend of $1 per share of common stock. The firm has 1,000 shares of stock outstanding. The company: A. must always show a current liability of $1,000 for dividends payable. B. is obligated to continue paying $1 per share per year. C. must still declare each dividend before it becomes an actual company liability. D. has a liability which must be paid at a later date should the company miss paying an annual dividend payment. E. will be declared in default and can face bankruptcy if it does not pay $1 per year to each shareholder on a timely basis. Difficulty level: Medium Topic: Dividends 6-50 Chapter 06 - Stock Valuation 45. The dividends paid by a corporation: I. to an individual become taxable income of that individual. II. reduce the taxable income of the corporation. III. are declared by the chief financial officer of the corporation. IV. to another corporation may or may not represent taxable income to the recipient. A. I only B. I and IV only C. II and III only D. I, II, and IV only E. I, III, and IV only Difficulty level: Medium Topic: Dividends 46. The owner of preferred stock: A. has the right to declare the company bankrupt whenever there are insufficient funds to pay dividends to the common shareholders. B. has the right to veto the outcome of an election held by the common shareholders. C. is entitled to a distribution of income prior to the common shareholders. D. has the right to collect payment on any unpaid dividends as long as the stock is noncumulative preferred. E. receives tax-free dividends if he is an individual and owns more than 20% of the outstanding preferred shares. Difficulty level: Medium Topic: Preferred Stock 47. A 8% preferred stock priced at $100 per share should pay _____ a year in dividends per share. A. $3 B. $6 C. $8 D. $30 E. $60 Difficulty level: Easy Topic: Preferred Stock 6-51 Chapter 06 - Stock Valuation 48. Which one of the following statements concerning preferred stock is correct? A. Unpaid preferred dividends are a liability of the firm. B. Preferred dividends must be paid quarterly provided the firm has net income that exceeds the amount of the quarterly dividend. C. Preferred dividends must be paid timely each quarter or the unpaid dividends start accruing interest. D. All unpaid dividends on preferred stock, regardless of the type of preferred, must be paid before any income can be distributed to common shareholders. E. Preferred shareholders may be granted voting rights and seats on the board if preferred dividend payments remain unpaid. Difficulty level: Medium Topic: Preferred Stock 49. In a liquidation, each share of 5% preferred stock is generally entitled to a liquidation payment of _____ as long as there are sufficient funds available. A. $1 B. $5 C. $10 D. $50 E. $100 Difficulty level: Medium Topic: Preferred Stock 50. The value of common stock today depends on A. the expected future holding period and the discount rate. B. the expected future dividends and the capital gains. C. the expected future dividends, capital gains and the discount rate. D. the expected future holding period and capital gains. E. None of the above. Difficulty level: Medium Topic: Common Stock Values 6-52 Chapter 06 - Stock Valuation 51. Which one of the following transactions occurs in the primary market? A. The repurchase of GHI stock from Tim by GHI B. The tax-free gift of DEF stock to Heather by Jennifer C. The sale of ABC stock by Fred Jones to Mary Smith D. The transfer of MNO stock from Tom to his son, Jon E. The initial sale of JKL stock by JKL to Jamie Difficulty level: Medium Topic: Primary Market 52. Which one of the following statements concerning dealers and brokers is correct? A. A dealer in market securities arranges sales between buyers and sellers for a fee. B. A dealer in market securities pays the asked price when purchasing securities. C. A broker in market securities earns income in the form of a bid-ask spread. D. A broker does not take ownership of the securities being traded. E. A broker deals solely in the primary market. Difficulty level: Easy Topic: Dealers and Brokers 53. The formula P0 = DIV/r represents A. the present value of a stream of zero growth dividends in perpetuity. B. the value of a no growth dividend stream. C. a lower value than if a positive growth element was included. D. All of the above. E. None of the above. Difficulty level: Easy Topic: Perpetuity Formula 6-53 Chapter 06 - Stock Valuation 54. The post is a stationary position on the floor of the New York Stock Exchange where a _____ is assigned to work. A. floor trader B. dealer C. specialist D. commission broker E. floor broker Difficulty level: Medium Topic: Specialist's Post 55. The closing price of a stock is quoted at 22.87, with a P/E of 26 and a net change of 1.42. Based on this information, which one of the following statements is correct? A. The closing price on the previous day was $1.42 higher than today's closing price. B. A dealer will buy the stock at $22.87 and sell it at $26 a share. C. The stock increased in value between yesterday's close and today's close by $.0142. D. The earnings per share are equal to 1/26th of $22.87. E. The earnings per share have increased by $1.42 this year. Difficulty level: Medium Topic: Stock Market Reporting 56. A stock listing contains the following information: P/E 17.5, closing price 33.10, dividend .80, YTD% chg 3.4, and net chg of -.50. Which of the following statements are correct given this information? I. The stock price has increased by 3.4% during the current year. II. The closing price on the previous trading day was $32.60. III. The earnings per share are approximately $1.89. IV. The current yield is 17.5%. A. I and II only B. I and III only C. II and III only D. III and IV only E. I, III, and IV only Difficulty level: Medium Topic: Stock Quote 6-54 Chapter 06 - Stock Valuation 57. The discount rate in equity valuation is composed entirely of: A. the dividend yield and the growth rate. B. the dividends paid and the capital gains yield. C. the dividends paid and the growth rate. D. the capital gains earned and the dividends paid. E. the capital gains earned and the growth rate. Difficulty level: Medium Topic: Discount Rate 58. The net present value of a growth opportunity, NPVGO, can be defined as A. the initial investment necessary for a new project. B. the net present value per share of an investment in a new project. C. a continual reinvestment of earnings when r < g. D. a single period investment when r > g. E. None of the above. Difficulty level: Medium Topic: NPVGO 59. Angelina's made two announcements concerning its common stock today. First, the company announced that its next annual dividend has been set at $2.20 a share. Secondly, the company announced that all future dividends will increase by 5% annually. What is the maximum amount you should pay to purchase a share of Angelina's stock if your goal is to earn a 10% rate of return? A. $31.60 B. $32.46 C. $37.44 D. $44.00 E. $46.51 ; P0 = $44.00 Difficulty level: Easy Topic: Stock Value - Constant Growth 6-55 Chapter 06 - Stock Valuation 60. How much are you willing to pay for one share of stock if the company just paid an $.80 annual dividend, the dividends increase by 4% annually and you require an 8% rate of return? A. $19.23 B. $20.00 C. $20.40 D. $20.80 E. $21.63 ; P0 = $20.80 Difficulty level: Easy Topic: Stock Value - Constant Growth 61. Lee Hong Imports paid a $1.00 per share annual dividend last week. Dividends are expected to increase by 5% annually. What is one share of this stock worth to you today if the appropriate discount rate is 14%? A. $7.14 B. $7.50 C. $11.11 D. $11.67 E. $12.25 ; P0 = $11.67 Difficulty level: Easy Topic: Stock Value - Constant Growth 6-56 Chapter 06 - Stock Valuation 62. Majestic Homes stock traditionally provides an 8% rate of return. The company just paid a $2 a year dividend which is expected to increase by 5% per year. If you are planning on buying 1,000 shares of this stock next year, how much should you expect to pay per share if the market rate of return for this type of security is 9% at the time of your purchase? A. $48.60 B. $52.50 C. $55.13 D. $57.89 E. $70.00 ; P1 = $55.13 Difficulty level: Easy Topic: Stock Value - Constant Growth 63. Leslie's Unique Clothing Stores offers a common stock that pays an annual dividend of $2.00 a share. The company has promised to maintain a constant dividend. How much are you willing to pay for one share of this stock if you want to earn 12% return on your equity investments? A. $10.00 B. $13.33 C. $16.67 D. $18.88 E. $20.00 ; P0 = $16.67 Difficulty level: Easy Topic: Stock Value - Constant Growth 6-57 Chapter 06 - Stock Valuation 64. Martin's Yachts has paid annual dividends of $1.40, $1.75, and $2.10 a share over the past three years, respectively. The company now predicts that it will maintain a constant dividend since its business has leveled off and sales are expected to remain relatively constant. Given the lack of future growth, you will only buy this stock if you can earn at least a 12% rate of return. What is the maximum amount you are willing to pay to buy one share of this stock today? A. $10.00 B. $13.33 C. $16.67 D. $17.50 E. $20.00 ; P0 = $17.50 Difficulty level: Medium Topic: Stock Value - Zero Growth 65. The common stock of Eddie's Engines, Inc. sells for $20.00 a share. The stock is expected to pay $1.80 per share next month when the annual dividend is distributed. Eddie's has established a pattern of increasing their dividends by 4% annually and expects to continue doing so. What is the market rate of return on this stock? A. 7% B. 9% C. 11% D. 13% E. 15% ; R = 13.00% Difficulty level: Medium Topic: Required Return 6-58 Chapter 06 - Stock Valuation 66. The dividend yield on Alpha's common stock is 4.8%. The company just paid a $2.10 dividend. The rumor is that the dividend will be $2.205 next year. The dividend growth rate is expected to remain constant at the current level. What is the required rate of return on Alpha's stock? A. 10.04% B. 16.07% C. 21.88% D. 43.75% E. 45.94% ; P0 = $43.75; ; g = .05; ; R = 10.04% Difficulty level: Medium Topic: Required Return 67. Martha's Vineyard recently paid a $3.60 annual dividend on its common stock. This dividend increases at an average rate of 4.5% per year. The stock is currently selling for $57.88 a share. What is the rate of return on the stock? A. 6.5% B. 7.5% C. 8.5% D. 9.0% E. 11.0% ; R = 9.5% Difficulty level: Medium Topic: Required Return 6-59 Chapter 06 - Stock Valuation 68. Bet'R Bilt Bikes just announced that their annual dividend for this coming year will be $1.42 a share and that all future dividends are expected to increase by 2.5% annually. What is the market rate of return if this stock is currently selling for $14.20 a share? A. 9.5% B. 10.0% C. 12.5% D. 13.5% E. 15.0% ; R = 12.50% Difficulty level: Medium Topic: Required Return 69. Shares of common stock of the Samson Co. offer an expected total return of 12%. The dividend is increasing at a constant 8% per year. The dividend yield must be: A. - 4%. B. 4%. C. 8%. D. 12%. E. 20%. Dividend yield = 4% Difficulty level: Medium Topic: Dividend yield vs. Capital gains yield 6-60 Chapter 06 - Stock Valuation 70. The common stock of Grady Co. had an 11.25% rate of return last year. The dividend amount was $.70 a share which equated to a dividend yield of 1.5%. What was the rate of price appreciation on the stock? A. 1.50% B. 8.00% C. 9.75% D. 11.25% E. 12.75% g = .1125 - .015 = .0975 = 9.75% Difficulty level: Easy Topic: Capital Gain 71. Weisbro and Sons common stock sells for $21 a share and pays an annual dividend that increases by 5% annually. The market rate of return on this stock is 9%. What is the amount of the last dividend paid by Weisbro and Sons? A. $.77 B. $.80 C. $.84 D. $.87 E. $.88 ; D0 = $.80 Difficulty level: Medium Topic: Dividend Amount 6-61 Chapter 06 - Stock Valuation 72. The common stock of Energizer's pays an annual dividend that is expected to increase by 10% annually. The stock commands a market rate of return of 12% and sells for $55.00 a share. What is the expected amount of the next dividend to be paid on Energizer's common stock? A. $.90 B. $1.00 C. $1.10 D. $1.21 E. $1.33 ; D1 = $1.10 Difficulty level: Medium Topic: Dividend Amount 73. The Reading Co. has adopted a policy of increasing the annual dividend on their common stock at a constant rate of 3.5% annually. The last dividend they paid was $0.95 a share. What will the company's dividend be in five years? A. $.90 B. $.93 C. $1.03 D. $1.13 E. $1.23 ; D6 = $1.07 Difficulty level: Medium Topic: Dividend Amount 6-62 Chapter 06 - Stock Valuation 74. A stock pays a constant annual dividend and sells for $31.11 a share. If the dividend yield on this stock is 9%, what is the dividend amount? A. $1.40 B. $1.80 C. $2.20 D. $2.40 E. $2.80 ; D0 = $2.80 Difficulty level: Medium Topic: Constant Dividend 75. You have decided that you would like to own some shares of GH Corp. but need an expected 12.5% rate of return to compensate for the perceived risk of such ownership. What is the maximum you are willing to spend per share to buy GH stock if the company pays a constant $3.40 annual dividend per share? A. $26.04 B. $26.87 C. $27.20 D. $28.29 E. $29.59 ; P0 = $27.20 Difficulty level: Medium Topic: Constant Dividend 6-63 Chapter 06 - Stock Valuation 76. Turnips and Parsley common stock sells for $31.65 a share at a market rate of return of 9.5%. The company just paid their annual dividend of $1.20. What is the rate of growth of their dividend? A. 5.2% B. 5.5% C. 5.9% D. 6.0% E. 6.3% .; g = 5.5% Difficulty level: Medium Topic: Growth Dividend 77. B&K Enterprises will pay an annual dividend of $2.10 a share on its common stock next year. Last week, the company paid a dividend of $2.00 a share. The company adheres to a constant rate of growth dividend policy. What will one share of B&K common stock be worth ten years from now if the applicable discount rate is 9%? A. $71.16 B. $74.01 C. $76.97 D. $80.05 E. $85.52 ; g = .05; ; D10 = $85.52 Difficulty level: Challenge Topic: Growth Dividend 6-64 Chapter 06 - Stock Valuation 78. Wilbert's Clothing Stores just paid a $1.25 annual dividend. The company has a policy whereby the dividend increases by 2% annually. You would like to purchase 100 shares of stock in this firm but realize that you will not have the funds to do so for another three years. If you desire a 12% rate of return, how much should you expect to pay for 100 shares when you can afford to buy this stock? Ignore trading costs. A. $1,040 B. $1,160 C. $1,353 D. $1,766 E. $1,810 ; P3 = $13.53 Purchase cost = 100 $13.53 = $135,379. ; P5 = $22.36 Difficulty level: Medium Topic: Growth Dividend 79. The Merriweather Co. just announced that it is paying a dividend next year of $1.60 and is establishing a policy whereby the dividend will increase by 3.5% annually thereafter. How much will one share of this stock be worth five years from now if the required return is 12%? A. $21.60 B. $22.36 C. $23.14 D. $23.95 E. $24.79 Difficulty level: Medium Topic: Growth Dividend 6-65 Chapter 06 - Stock Valuation 80. Shares of the Katydid Co. common stock are currently selling for $33.60. The last dividend paid was $1.60 per share. The market rate of return is 10%. At what rate is the dividend growing? A. 3.50% B. 4.60% C. 5.00% D. 6.05% E. 6.91% ; g = 5.00% Difficulty level: Medium Topic: Growth Dividend 81. The Bell Weather Co. is a new firm in a rapidly growing industry. The company is planning on increasing its annual dividend by 20% a year for the next four years and then decreasing the growth rate to 5% per year. The company just paid its annual dividend in the amount of $1.00 per share. What is the current value of one share of this stock if the required rate of return is 10.25%? A. $33.04 B. $38.19 C. $41.05 D. $43.19 E. $45.81 Dividends for the first 4 years are: $1.20, $1.44, $1.728, and $2.0736. ;P4 = $51.2301 ; P0 = $33.04 Difficulty level: Challenge Topic: Differential Growth Dividends 6-66 Chapter 06 - Stock Valuation 82. The Extreme Reaches Corp. last paid a $1.50 per share annual dividend. The company is planning on paying $3.00, $5.00, $7.50, and $10.00 a share over the next four years, respectively. After that the dividend will be a constant $2.50 per share per year. What is the market price of this stock if the market rate of return is 14%? A. $17.04 B. $22.39 C. $26.57 D. $28.03 E. $33.71 ; P4 = $17.8571 ; P0 = $31.61 Difficulty level: Challenge Topic: Differential Growth Dividends 83. Can't Hold Me Back, Inc. is preparing to pay its first dividends. It is going to pay $1.00, $2.50, and $5.00 a share over the next three years, respectively. After that, the company has stated that the annual dividend will be $1.25 per share indefinitely. What is this stock worth to you per share if you demand a 6% rate of return? A. $7.20 B. $14.48 C. $18.88 D. $24.85 E. $31.61 . ; P3 = $20.8333 ; P0 = $24.85 Every answer is wrong. The correct answer is 24.85. See math section Difficulty level: Challenge Topic: Differential Growth Dividends 6-67 Chapter 06 - Stock Valuation 84. NU YU announced today that it will begin paying annual dividends. The first dividend will be paid next year in the amount of $.25 a share. The following dividends will be $.40, $.60, and $.75 a share annually for the following three years, respectively. After that, dividends are projected to increase by 3.5% per year. How much are you willing to pay to buy one share of this stock if your desired rate of return is 12%? A. $1.45 B. $5.80 C. $7.25 D. $9.06 E. $10.58 . ; P4 = $9.13235 ; ; P0= $7.25 Difficulty level: Challenge Topic: Differential Growth Dividends 85. Now or Later, Inc. recently paid $1.10 as an annual dividend. Future dividends are projected at $1.14, $1.18, $1.22, and $1.25 over the next four years, respectively. After that, the dividend is expected to increase by 2% annually. What is one share of this stock worth to you if you require an 8% rate of return on similar investments? A. $15.62 B. $19.57 C. $21.21 D. $23.33 E. $25.98 ; P4 = $21.25 ; P0 = $19.57 Difficulty level: Challenge Topic: Differential Growth Dividends 6-68 Chapter 06 - Stock Valuation 86. The Red Bud Co. just paid a dividend of $1.20 a share. The company announced today that it will continue to pay this constant dividend for the next three years after which time it will discontinue paying dividends permanently. What is one share of this stock worth today if the required rate of return is 8%? A. $3.09 B. $3.15 C. $3.23 D. $3.44 E. $3.60 ; P0= $3.02 Difficulty level: Challenge Topic: Differential Growth Dividends 87. Bill Bailey and Sons pays no dividend at the present time. The company plans to start paying an annual dividend in the amount of $.30 a share for two years commencing two years from today. After that time, the company plans on paying a constant $1 a share dividend indefinitely. How much are you willing to pay to buy a share of this stock if your required return is 15%? A. $4.42 B. $4.81 C. $5.19 D. $5.36 E. $5.58 ; P3 = $6.6667; ; P0 = $4.81 Difficulty level: Challenge Topic: Differential Growth Dividends 6-69 Chapter 06 - Stock Valuation 88. The Lighthouse Co. is in a downsizing mode. The company paid a $2.50 annual dividend last year. The company has announced plans to lower the dividend by $.50 a year. Once the dividend amount becomes zero, the company will cease all dividends permanently. You place a required rate of return of 16% on this particular stock given the company's situation. What is one share of this stock worth to you today? A. $3.76 B. $4.08 C. $4.87 D. $5.13 E. $5.39 ; P0 = $3.76 Difficulty level: Challenge Topic: Differential Growth Dividends 89. Mother and Daughter Enterprises is a relatively new firm that appears to be on the road to great success. The company paid its first annual dividend yesterday in the amount of $.28 a share. The company plans to double each annual dividend payment for the next three years. After that time, it is planning on paying a constant $1.50 per share indefinitely. What is one share of this stock worth today if the market rate of return on similar securities is 11.5%? A. $9.41 B. $11.40 C. $11.46 D. $11.93 E. $12.43 Dividends for the next three years are $.56, $1.12, and $2.24. ; P3 = $13.04348; P0 = $12.43 Difficulty level: Challenge Topic: Differential Growth Dividends 6-70 Chapter 06 - Stock Valuation 90. BC n D just paid its annual dividend of $.60 a share. The projected dividends for the next five years are $.30, $.50, $.75, $1.00, and $1.20, respectively. After that time, the dividends will be held constant at $1.40. What is this stock worth today at a 6% discount rate? A. $20.48 B. $20.60 C. $21.02 D. $21.28 E. $21.43 ; P5 = $23.333 P0 = $20.48 Difficulty level: Challenge Topic: Differential Growth Dividends 91. Beaksley, Inc. is a very cyclical type of business that is reflected in its dividend policy. The firm pays a $2.00 a share dividend every other year. The last dividend was paid last year. Five years from now, the company is repurchasing all of the outstanding shares at a price of $55 a share. At an 9% rate of return, what is this stock worth today? A. $34.03 B. $37.21 C. $38.85 D. $44.09 E. $51.18 P0 = $38.85 Difficulty level: Challenge Topic: Differential Growth Dividends 6-71 Chapter 06 - Stock Valuation 92. Last week, Railway Cabooses paid their annual dividend of $1.20 per share. The company has been reducing the dividends by 5% each year. How much are you willing to pay to purchase stock in this company if your required rate of return is 14%? A. $4.50 B. $6.00 C. $10.80 D. $12.67 E. $27.00 ; P0 = $6.00 Difficulty level: Medium Topic: Negative Growth 93. Nu-Tek, Inc. is expecting a period of intense growth, so it has decided to retain more of its earnings to help finance that growth. As a result it is going to reduce its annual dividend by 10% a year for the next three years. After that it will maintain a constant dividend of $.70 a share. Last year, the company paid $1.80 per share. What is the market value of this stock if the required rate of return is 13%? A. $6.79 B. $7.22 C. $8.22 D. $8.87 E. $9.01 ; P3 = $5.3846 ; P0 = $7.22 Difficulty level: Challenge Topic: Negative Growth 6-72 Chapter 06 - Stock Valuation 94. The Double Dip Co. is expecting its ice cream sales to decline due to the increased interest in healthy eating. Thus, the company has announced that it will be reducing its annual dividend by 5% a year for the next two years. After that, Double Dip will maintain a constant dividend of $1 a share. Last year, the company paid $1.40 per share. What is this stock worth to you if you require a 9% rate of return? A. $10.86 B. $11.11 C. $11.64 D. $12.98 E. $14.23 ; P2 = $11.1111 P0 = $11.64 Difficulty level: Challenge Topic: Negative Growth 95. Butterup's N More wants to offer some preferred stock that pays an annual dividend of $2.00 a share forever. The company has determined that stocks with similar characteristics provide a 10% rate of return. What price should Butterup's expect to receive per share for this stock offering? A. $18.35 B. $20.00 C. $21.80 D. $22.22 E. $24.22 P = $2.00 .10 = $20.00 Difficulty level: Easy Topic: Preferred Stock 6-73 Chapter 06 - Stock Valuation 96. The preferred stock of North Coast Shoreline pays an annual dividend of $1.60 and sells for $20.65 a share. What is the dividend yield on this security? A. 5.95% B. 7.75% C. 8.40% D. 11.90% E. 14.17% R = $1.60 $20.65 = 7.75% Difficulty level: Easy Topic: Preferred Stock 97. Jim owns shares of Abco, Inc. preferred stock which he says provides him with a constant 6.58% rate of return. The stock is currently priced at $45.60 a share. What is the amount of the dividend per share? A. $3.00 B. $3.15 C. $3.50 D. $3.54 E. $3.62 D = .0658 $45.60 = $3.00 Difficulty level: Easy Topic: Preferred Stock 6-74 Chapter 06 - Stock Valuation 98. You want to earn a 12% rate of return. Panco, Inc. preferred stock pays a $4.50 annual dividend. What is the maximum price you are willing to pay for one share of this stock? A. $32.50 B. $37.50 C. $39.00 D. $40.50 E. $45.00 P0 = $4.50 .12 = $37.50 Difficulty level: Medium Topic: Preferred Stock 99. Which of the following amounts is closest to what should be paid for Overland common stock? Overland has just paid a dividend of $2.25. These dividends are expected to grow at a rate of 5% in the foreseeable future. The risk of this company suggests that future cash flows should be discounted at a rate of 11%. A. $20.45 B. $21.48 C. $37.50 D. $39.38 E. $47.70 Value of stock = D0(1+g)/(r-g) = $2.25(1+0.05)/(0.11-0.05) = $39.375 Difficulty level: Medium Topic: Constant Growth Stock Valuation 6-75 Chapter 06 - Stock Valuation 100. What would be the maximum an investor should pay for the common stock of a firm that has no growth opportunities but pays a dividend of $1.85 per year? The next dividend will be paid in exactly 1 year. The required rate of return is 14.5%. A. $9.52 B. $10.88 C. $12.76 D. $17.00 E. None of the above. $1.85/.145 = $12.76 Difficulty level: Easy Topic: Stock Valuation/Perpetuity 101. Mortgage Instruments Inc. is expected to pay dividends of $1.04 next year. The company just paid dividends of $1. This growth rate is expected to continue. How much should be paid for Mortgage Instruments stock just after the dividend if the appropriate discount rate is 6%? A. $20.00 B. $21.50 C. $34.75 D. $51.25 E. $52.00 g = (D1-D0)/D0 = ($1.03-$1.00)/$1.00 = 0.03 (g=3%) Value of stock = D1/(r-g) = $1.03/(0.05-0.03) = $51.50 Difficulty level: Medium Topic: Constant Growth Stock Valuation 6-76 Chapter 06 - Stock Valuation 102. The Felix Corp. projects to pay a dividend of $.75 next year and then have it grow at 12% for the following three years before growing at 8% indefinitely thereafter. The equity has a required return of 10% in the market. The price of the stock should be ___. A. $9.375 B. $17.05 C. $41.39 D. $59.80 E. $62.38 Value of stock = [($0.75/1.1) + ($0.84/(1.1)2) + ($0.94/(1.1)3) + ($1.05/(1.1)4) + (($1.13/.02)/ (1.1)-4) = $41.39 Difficulty level: Challenge Topic: Differential Stock Valuation 103. If a company paid a dividend of $0.50 last year and it is expected to grow at 7% for the next 8 years and then grow at 5% thereafter, the dividend expected in year 8 is __. A. $0.73 B. $0.75 C. $0.78 D. $0.79 E. $0.86 Div(8) = $0.50*(1+.07)8 = $0.86 Div Year 8 = .50*1.07^8=.86 Difficulty level: Medium Topic: Forecasted Dividend Payment 6-77 Chapter 06 - Stock Valuation 104. The Lory Company had net earnings of $127,000 this past year. Dividends of $38,100 were paid on the company's equity of $1,587,500. If Lory has 100,000 shares outstanding with a current market price of $11.625 per share, and the growth rate was 5.6% what is the required rate of return? A. 4.2% B. 6% C. 9% D. 14% E. None of the above. R = Div/P0 + g = (.381(1.056))/11.625)+.056 = (.40/11.625)+.056 = .0346 + .056 = .0906 = 9% Difficulty level: Medium Topic: Required Return 105. Doctors-On-Call, a newly formed medical group, just paid a dividend of $.50. The company's dividends are expected to grow at a 20% rate for the next 5 years and at a 3% rate thereafter. What is the value of the stock if the appropriate discount rate is 12%? A. $8.08 B. $11.17 C. $14.22 D. $17.32 E. $30.90 Years 1-5: ($0.50(1.2)t/(1.12)t + (1.28/.09)/(1.12)5 = $11.17 Difficulty level: Challenge Topic: Differential Growth Valuation 6-78 Chapter 06 - Stock Valuation 106. A stock you are interested in paid a dividend of $1 last year. The anticipated growth rate in dividends and earnings is 20% for the next year and 10% the year after that before settling down to a constant 5% growth rate. The discount rate is 12%. Calculate the expected price of the stock. A. $17.20 B. $17.90 C. $18.20 D. $19.40 E. $19.75 Price = $1.00(1.20)/1.12 + $1.20(1.100)/1.2544 + [$1.32(1.05)/(.12-.05)]/1.2544 = $17.90 Difficulty level: Challenge Topic: Differential Growth Valuation 107. A stock you are interested in paid a dividend of $1 last year. The anticipated growth rate in dividends and earnings is 25% for the next 2 years before settling down to a constant 5% growth rate. The discount rate is 12%. Calculate the expected price of the stock. A. $15.38 B. $20.50 C. $21.04 D. $22.27 E. $26.14 Price = $1.00(1.25)/1.12 + $1.25(1.25)/1.2544 + [$1.5625(1.05)/(.12-.05)]/1.2544 = $21.04 Difficulty level: Challenge Topic: Differential Growth Valuation 6-79 Chapter 06 - Stock Valuation 108. Which of the following values is closest to the amount that should be paid for a stock that will pay a dividend of $10 in one year and $11 in two years? The stock will be sold in 2 years for an estimated price of $120. The appropriate discount rate is 8%. A. $114.60 B. $119.40 C. $124.20 D. $121.57 E. $138.75 Value of stock = D1/(1+r) + (D2+P2)/(1+r)2 = $10/(1+0.08) + ($11+$120)/(1+0.08)2 = $121.57 Difficulty level: Medium Topic: Stock Valuation 109. You want to earn a 12% rate of return. Panco, Inc. preferred stock pays a $6.75 annual dividend. What is the maximum price you are willing to pay for one share of this stock? A. $6.75 B. $52.54 C. $55.00 D. $56.25 E. $58.21 P0 = $6.75 .12 = $56.25 Difficulty level: Medium Topic: Preferred Stock 6-80 Chapter 06 - Stock Valuation 110. Which of the following amounts is closest to what should be paid for Ryan common stock? Ryan has just paid a dividend of $1.75. These dividends are expected to grow at a rate of 5% in the foreseeable future. The risk of this company suggests that future cash flows should be discounted at a rate of 12%. A. $18.75 B. $19.50 C. $22.50 D. $26.25 E. None of the above. Value of stock = D0(1+g)/(r-g) = $1.75(1+0.05)/(0.12-0.05) = $26.25 Difficulty level: Medium Topic: Constant Growth Stock Valuation 111. What would be the maximum an investor should pay for the common stock of a firm that has no growth opportunities but pays a dividend of $2.50 per year? The next dividend will be paid in exactly 1 year. The required rate of return is 11%. A. $19.52 B. $21.50 C. $22.73 D. $25.22 E. None of the above. $2.50/.11 = $22.73 Difficulty level: Easy Topic: Stock Valuation/Perpetuity 6-81 Chapter 06 - Stock Valuation 112. Ramchander Investment Group is expected to pay dividends of $1.40 next year. The company just paid dividends of $1.30. This growth rate is expected to continue. How much should be paid for Ramchander Investment Group stock just after the dividend if the appropriate discount rate is 10%? A. $14.00 B. $35.85 C. $58.90 D. $60.61 E. $65.27 g = (D1-D0)/D0 = ($1.40-$1.30)/$1.30 = 0.0769 (g=7.69%) Value of stock = D1/(r-g) = $1.40/(0.10-0.0769) = $60.61 Difficulty level: Medium Topic: Constant Growth Stock Valuation Essay Questions 113. List the four types of New York Stock Exchange members and give a brief definition of what each member does. This is a simple listing question, the answer to which should include: 1. Commission broker: Executes customer orders to buy/sell stock as transmitted to the exchange floor 2. Specialist (market maker): Acts as a dealer in a small number of securities on the exchange floor 3. Floor broker: Executes orders for commission brokers on a fee basis 4. Floor trader: Trades for their own account in an attempt to profit on temporary price fluctuations Difficulty level: Difficult Topic: NYSE Members 6-82 Chapter 06 - Stock Valuation 114. What are the primary differences between NASDAQ and the NYSE? According to the basic information in the text, the NYSE has a physical location, while NASDAQ does not. NASDAQ has multiple market makers while the NYSE utilizes specialists for each security traded. Also, NASDAQ is a dealer market while the NYSE utilizes brokers. Difficulty level: Difficult Topic: NASDAQ Vs. NYSE 115. What are the components of the required rate of return on a share of stock? Briefly explain each component. The two components are dividend yield, which measures the annual percentage income return on a stock, and the capital gains yield, which is the percentage of price appreciation or depreciation. Difficulty level: Difficult Topic: Required Return 116. Briefly explain the differences between preferred and common stock. Common stockholders have the right to vote on corporate matters and have the right to receive the residual value of the firm after all liabilities and preferred stockholders are paid in a liquidation. Preferred stockholders have a promised dividend, may or may not have the right to collect dividends that have been passed, and typically will be rated much like bonds. In a liquidation, preferred shareholders have a preference over common stockholders. Difficulty level: Difficult Topic: Preferred vs. Common stock 6-83 Chapter 06 - Stock Valuation 117. Explain whether it is easier to find the required return on a publicly traded stock or a publicly traded bond, and explain why. Bonds, unlike stocks, have a final maturity date and promised payments at fixed periods of time. Thus, once an appropriate discount rate is established, valuing a bond is relatively simple. For stocks, the only valuation model we have up to this point in the text is the dividend growth model which requires estimation of a dividend growth rate and also requires that certain conditions be met before the dividend growth model can be applied. Normally, all of the information required to find the yield on a publicly traded bond is publicly available while only the price and the most current dividend are available for stocks. Difficulty level: Difficult Topic: Stocks vs. Bonds 118. A number of publicly traded firms pay no dividends yet investors are willing to buy shares in these firms. How is this possible? Does this violate our basic principle of stock valuation? Explain. Our basic principle of stock valuation is that the value of a share of stock is simply equal to the present value of all of the expected dividends on the stock. According to the dividend growth model, an asset that has no expected cash flows has a value of zero, so if investors are willing to purchase shares of stock in firms that pay no dividends, they evidently expect that the firms will begin paying dividends at some point in the future. Difficulty level: Difficult Topic: Zero-Dividend Stocks 6-84 Chapter 06 - Stock Valuation 119. A firm has two classes of common stock outstanding: Class A, which carries voting rights of 10 votes per share but receives no dividends (ever), and Class B, which carries voting rights of 1 vote per share and pays dividends whenever they are declared by the board. Which would you be willing to pay more for and why? This is a very open-ended question to get the students thinking about the differing interests of investors. Management of the firm would likely prefer Class A while investors interested in dividends would likely prefer Class B shares. The Class B shares with their ordinary voting rights and dividends can be valued using the dividend growth model but the Class A shares, whose value is derived completely from the voting rights, would be very difficult to value. Difficulty level: Difficult Topic: Classes of Stock 120. Are most stocks constant growth or differential growth? Why? While there are some, generally slow growth, stable firms that likely have a constant growth rate, most analysts use the differential growth model, even for these firms. Even for a stable firm, it is possible to look more closely at the investment projects facing the firm in the next few years with more accuracy than those several years out into the future. For this reason alone, the use of the differential growth model is nearly universally applied in this type of common stock valuation. Most firms will indeed have differential growth; others may have perceived differential growth, but the two groups are hard to distinguish when evaluating the firm or its projects. The differential growth model, once built into an Excel spreadsheet, is flexible to changes and generally makes a better practical valuation model. Difficulty level: Difficult Topic: Constant Growth Stocks 6-85

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Pitt. State - ECONOMIC - 650
Chapter 07 - Net Present Value and Other Investment RulesChapter 07Net Present Value and Other Investment RulesMultiple Choice Questions1. The difference between the present value of an investment and its cost is the:A. payback period.B. internal ra
Pitt. State - ECONOMIC - 650
Chapter 08 - Making Capital Investment DecisionsChapter 08Making Capital Investment DecisionsMultiple Choice Questions1. The changes in a firm's future cash flows that are a direct consequence of accepting aproject are called _ cash flows.A. after-t
Pitt. State - ECONOMIC - 650
Chapter 09 - Risk Analysis, Real Options, and Capital BudgetingChapter 09Risk Analysis, Real Options, and Capital BudgetingMultiple Choice Questions1. An analysis of what happens to the estimate of the net present value when you examine anumber of di
Pitt. State - ECONOMIC - 650
Chapter 10 - Risk and Return Lessons from Market HistoryChapter 10Risk and Return Lessons from Market HistoryMultiple Choice Questions1. The excess return required from a risky asset over that required from a risk-free asset iscalled the:A. risk pre
Pitt. State - ECONOMIC - 650
Chapter 11 - Return and Risk: The Capital Asset Pricing Model (CAPM)Chapter 11Return and Risk: The Capital Asset Pricing Model (CAPM)Multiple Choice Questions1. A portfolio is:A. the standard deviation of returns for a collection of risky assets.B.
Pitt. State - ECONOMIC - 650
Chapter 12 - Risk, Cost of Capital, and Capital BudgetingChapter 12Risk, Cost of Capital, and Capital BudgetingMultiple Choice Questions1. The weighted average of the firm's costs of equity, preferred stock, and after tax debt isthe:A. reward to ris
Pitt. State - ECONOMIC - 650
Chapter 13 - Efficient Capital Markets And Behavioral ChallengesChapter 13Efficient Capital Markets And Behavioral ChallengesMultiple Choice Questions1. An efficient capital market is one in which:A. brokerage commissions are zero.B. taxes are irrel
Pitt. State - ECONOMIC - 650
Chapter 14 - Capital Structure: Basic ConceptsChapter 14Capital Structure: Basic ConceptsMultiple Choice Questions1. The use of personal borrowing to change the overall amount of financial leverage to whichan individual is exposed is called:A. priva
Pitt. State - ECONOMIC - 650
Chapter 15 - Capital Structure: Limits to the Use of DebtChapter 15Capital Structure: Limits to the Use of DebtMultiple Choice Questions1. The explicit costs, such as the legal expenses, associated with corporate default areclassified as _ costs.A.
Pitt. State - ECONOMIC - 650
Chapter 16 - Dividend and Other PayoutsChapter 16Dividend and Other PayoutsMultiple Choice Questions1. Payments made out of a firm's earnings to its owners in the form of cash or stock arecalled:A. stock splits.B. distributions.C. share repurchase
Pitt. State - ECONOMIC - 650
Chapter 17 - Options and Corporate FinanceChapter 17Options and Corporate FinanceMultiple Choice Questions1. A financial contract that gives its owner the right, but not the obligation, to buy or sell aspecified asset at an agreed-upon price on or be
Pitt. State - ECONOMIC - 650
Chapter 18 - Short-term finance and planningChapter 18Short-term finance and planningMultiple Choice Questions1. The length of time between the acquisition of inventory and the collection of cash fromreceivables is called the:A. inventory period.B.
Pitt. State - ECONOMIC - 650
Chapter 19 - Raising CapitalChapter 19Raising CapitalMultiple Choice Questions1. Venture capital is most apt to be the source of funding for which one of the following?A. Global expansion for an established firmB. Bankruptcy reorganizationC. Season
Pitt. State - ECONOMIC - 650
12.3.The controller for Mitchell Supply Company has established the following overhead costpools and cost drivers:Overhead Cost PoolMachine setupsMaterial handlingQuality control inspectionOther overhead costsTotalOverhead Cost PoolMachine set
Pitt. State - ECONOMIC - 650
PROBLEM 1 Solution1.Manufacturing overhead:Indirect labor. $109,000Building depreciation ($80,000 x 75%).60,000Other factory costs. 344,000Total. $513,0002.Cost of goods manufactured:Direct material:Raw-material inventory, Jan. 1 $ 15,800Add:
Pitt. State - ECONOMIC - 650
Review Problem 1Review Problem 2Review Problem 3
Pitt. State - ECONOMIC - 650
PROBLEM 7-34 (30 MINUTES)1.Break-even point in units, using the equation approach:$16X ($10 + $2)X =$600,000$4X =0$600,000X==2.New projected sales =volume=Net income =150,000 units200,000 110%220,000 units(220,000)($16 $12) $600,000==
Pitt. State - ECONOMIC - 650
EXERCISE 3-28 (15 MINUTES)1.Applied manufacturing overhead= total manufacturing costs30%= $2,500,00030%= $750,000Applied manufacturing overhead= direct-labor cost80%Direct-labor cost = applied manufacturing overhead80%= $750,000.8= $937,500EXER
Pitt. State - ECONOMIC - 650
EXERCISE 9-22 (20 MINUTES)1.AprilMayJune$80,000$60,000$90,000aFrom cash sales.$ 40,000b$ 30,000c$ 45,000From sales onaccount.36,000dSales.Cash receipts:Totalcashreceipts$76,00034,000$ 84,000$64,000a$90,000= $45,000 2b
Pitt. State - ECONOMIC - 650
PROBLEM 10-44 (25 MINUTES)$24,840 $24,300$540 Unfavorable=(AQ SP) (SQ SP)=(9,500 $1.35) (10,000* $1.35)=$12,825 $13,500=Direct-materialquantity variance(18,000 $1.38) (18,000 $1.35)=2.(PQ AP) (PQ SP)=Direct-material pricevariance==
Pitt. State - ECONOMIC - 650
EXERCISE 7-24 (20 MINUTES)1.Break-even point (in units) == = 8,000 pizzas2.Contribution-margin ratio== = .5EXERCISE 7-24 (CONTINUED)3.Break-even point (in sales dollars)== = $80,0004.Let X denote the sales volume of pizzas required to earn a
Pitt. State - ECONOMIC - 650
EXERCISE 5-26 (15 MINUTES)1.Material-handling cost per lens:*The total number of direct-labor hours.An alternative calculation, since both types of product use the same amount of thecost driver, is the following:*The total number of units (of both t
Berkeley College - BUSS - 332
Assignment #1 (Chapters 1-2)DIRECTIONS: All work must be TYPED WITHIN THIS TEMPLATE. Conductresearch when necessary and cite all resources. DO NOT simply copy answersfrom within your textbook or other sources. You must provide answers utilizingyour ow
Christopher Newport University - ANSI - 3543
1.2.3.4.5.6.7.8.9.Writing Assignment 1Define nutrition in your own words.Nutrition is the process of the body absorbing necessary nutrients from ingested food thatare required by living things to survive. Good nutrition allows the organism to
Christopher Newport University - ANSI - 3543
1.2.3.4.5.6.Writing Assignment 2Compare and contrast the definition of ration with that of diet.An animals diet is the mixture of various foods that it consumes in order to gathernourishment. A ration is a fixed amount of that food used in the di
Christopher Newport University - ANSI - 3543
1.2.3.4.Writing Assignment 3Describe proper sampling techniques for a semi-trailer load of hay if I want to send asample to the lab for analysis.To yield proper samples for a semi-trailer load of hay, certain measures have to be takenin order to m
Christopher Newport University - ANSI - 3543
Writing Assignment #41. Explain why ruminant, cecal fermenters and monogastrics have such different abilitiesfor digesting forages.Ruminants, cecal fermenters, and monogastrics have different abilities fordigesting forages because they each poses uniq
Christopher Newport University - ANSI - 3543
Writing Assignment 51. Explain the problem of getting an accurate weight on animals in a growth trial. Why is ita problem, in which animals is it the biggest problem, and how do we correct for it?Getting an accurate weight on animals during a growth tr
Christopher Newport University - ANSI - 3543
Writing Assignment #61. Presume that your cattle herd is not drinking much water. It is your job to discover why.Develop a step-by-step plan for troubleshooting the problem. Describe what steps youwould take at each point in your plan if you found a po
Christopher Newport University - ANSI - 3543
Writing Assignment 71. Explain why there is very little carbohydrate found in the body of a living animal.The body of a living animal contains less than 1% of carbohydrates. This isbecause the dietary carbohydrate that remains unused in the body is mos
Christopher Newport University - ANSI - 3543
Writing Assignment 81. Explain the significance of glycerol to the structure of a triglyceride.Glycerol is important to the structure of a triglyceride because it is thetrifunctional alcohol constituent of triglycerides found in plants and animals.Tri
Christopher Newport University - ANSI - 3543
Writing Assignment 9: Proteins and Amino Acids1. How does an amino acid differ chemically from a simple carbohydrate like glucose? Intheir purpose to the body?Chemically, the composition of amino acids and a simple carbohydrate likeglucose are differe
Christopher Newport University - ANSI - 3543
Writing Assignment 10: Energy Metabolism1. Describe the relative strengths and weaknesses of DE, TDN, ME, and NE. (Bullet youranswers) Digestible Energy (DE)o Strengths It can measure the amount of energy lost in the feces. Ifenergy loss is high, die
Christopher Newport University - ANSI - 3543
Writing Assignment 11: Macrominerals1. What macromineral is found in the largest quantity in the animal body on an absoluteweight basis? Why is this so? What regulates the levels of this mineral in the blood? Besure to mention the specific hormones inv
Christopher Newport University - ANSI - 3543
Writing Assignment 12: Micro- (Trace) Minerals1. Describe the functions of iron and how this relates to where iron is located in the body.Also, explain why iron is so important to baby pigs and what syndrome is correlated withiron deficiency in this pa
Christopher Newport University - ANSI - 3543
Writing Assignment 13: Vitamins1. Presume that you have just been called in to consult for a swine farmer whose pigs arentgrowing well, seem to have some bone abnormalities, seem weak, are anemic, have astaggering gait, are goose stepping, and seem pro
Christopher Newport University - ANSI - 3543
Quiz 81. In the Griffiths experiments _, when injected into healthy mice, caused the miceto die.Heat killed S and live R bacteria2. Which of the following would stop the transformation seen in the Griffiths experiment?DNAase3. In the Hershey-Chase e
Christopher Newport University - ANSI - 3543
Chapter 111. Know Mendels 2 laws and thoroughly understand how both relate to meiosis andgamete production.a. Principle of Segregationa. During meiosis- paired alleles separateb. Gametes- have one allele per locusb. Principle of Independent Assortme
Christopher Newport University - ANSI - 3543
Study Guide Chapter 121. Know the Griffiths and Hershey-Chase experiments. What did they show? Whywere they important? Griffithso Smooth (S) strain- known to be virulent and cause disease anddeath When injected live, mice died When heat-killed, mic
Christopher Newport University - ANSI - 3543
Study Guide Chapter 121. Know the Griffiths and Hershey-Chase experiments. What did they show? Whywere they important? Griffithso Smooth (S) strain- known to be virulent and cause disease anddeath When injected live, mice died When heat-killed, mic
Christopher Newport University - ANSI - 3543
Study Guide Chapter 131. Understand transcription of RNA from DNA including directions, promoters,enzyme, etc. Transcription- the process in which RNA synthesis takes information in DNAand copies it as RNA; complementary to template DNA strando Direc
Christopher Newport University - ANSI - 3543
Chapter 141. Understand the differences between prokaryotic and eukaryotic control. Prokaryotico Negative Control Inducible genes Repressible geneso Positive Control Activator protein Activator complex Eukaryotico Transcriptional controlo Postt
Christopher Newport University - ANSI - 3543
Chapter 151. Know PCR and why it is used. Polymerase chain reaction Automated in vitro technique (not in living organisms)o targets a particular DNA sequence by specific primerso copies it using heat-resistant DNA polymerase (Taq) Used to analyze ti
Christopher Newport University - ANSI - 3543
Chapter 161. Know the different inheritance patterns of autosomal recessive, autosomaldominant and X-linked recessive diseases. Autosomal Recessiveo Not usually expressed in parentso Expressed in of childreno Expressed in male and female children A
Christopher Newport University - ANSI - 3543
Chapter 6 and 7 Study GuideChapter 61. Understand the sequence of events that takes place in cell signaling.Cell signaling involves Synthesis, release, and transport of signaling moleculeso Can be neurotransmitters, hormones, and other regulatorymol
Christopher Newport University - ANSI - 3543
Chapter 91. In general, know how light energy affects chlorophylls and other antenna pigments. Photosystem I and II include chlorophyll molecules and accessory pigmentsorganized with pigment-binding proteins into antenna complexes. Only special pair o
Christopher Newport University - ANSI - 3543
Microbiology Exam 3 Study GuidePhototrophyWhat is neededAccessories (light-absorbers)Carbon SourceAnoxygenicBacteriochlorophylls Mg Core;One reaction center (reverseelectron transport)Carotenoids and PhycobilinsCO2OxygenicChlorophyll Mg Core;
Christopher Newport University - ANSI - 3543
Homework 11. The term nano refers to materials in the nanoscale range, between 1-10nm. Thesenanomaterials include organic and inorganic molecules as well as semiconductorparticles.2. Bulk materials interact with light much differently than nanomateria
Christopher Newport University - ANSI - 3543
1.2.3.4.Homework 2Kinetic energy is defined as the energy a body or system has with respect to the motion of thebody or of the particles in the system. The accelerated electrons produced by the incidentelectron beam carry a significant amount of ki
Christopher Newport University - ANSI - 3543
Kelly HayesHomework 31. X-ray diffraction works by measuring the reflection of x-rays off of a crystalline object tocreate a diffraction pattern of the crystal. This diffraction pattern is a result of the how fareach of the x-rays travels and the inte
Christopher Newport University - ANSI - 3543
Kelly HayesHomework 41. The most common AFM operating modes for looking at surface topography are thecontact mode (static mode), the non-contact mode, and the tapping mode (both dynamicmodes). The contact mode is when the AFM tip is dragged over the s
Christopher Newport University - ANSI - 3543
Kelly HayesHomework 51. SAM stands for self assembled monolayers. SAMs are nanostructures that occurspontaneously from bottom-up synthesis. These structures are held together by weakinteractions and are considered to be one of the simplest structures
Christopher Newport University - BIOL - 101
Kelly HayesMay 18, 2011Paper #3Cystic FibrosisCystic fibrosis is an inherited disorder that affects the lungs and digestive system and canbe life-threatening. A defective gene alters the cells that produce mucus, which is usually thinand slippery. P
Christopher Newport University - BIOL - 101
CysticFibrosisBy:KellyHayesandLoganSappingtonHistory1930sDr.Fanconi,aSwisspediatrician,wasbelievedtohavewrittentheearliestpaperonthedisease.HereferredtothediseaseasCeliacsyndromeandnotedthataffectedpatientshadchangesinthepancreas.1938CysticFibr
Christopher Newport University - BIOL - 101
Cystic Fibrosis PresentationSlide 1: Cystic Fibrosis By: Kelly Hayes and Logan SappingtonSlide 2: History 1930s - Dr. Fanconi, a Swiss pediatrician, was believed to have written the earliest paper on thedisease. He referred to the disease as Celiac sy
Christopher Newport University - BIOL - 101
Kelly HayesMay 24, 2010Paper #4Ehlers-Danlos SyndromeEhlers-Danlos syndrome is a group of inherited disorders that affects the connectivetissue in the body. It is characterized by very fragile and flexible joints that extend beyond thenormal range o
Christopher Newport University - BIOL - 101
EDS PresentationSlide 1: Ehlers-Danlos syndrome By: Kelly HayesSlide 2: My StorySlide 3: What is EDS?o Group of disorders that affect the connective tissue Connective tissue provides support for skin, muscles, and ligamentso Characterized by extrem
Christopher Newport University - BIOL - 101
By: Kelly HayesEhlers-danlos syndromeMy StoryI blame myparents.What is EDS?Group ofdisorders thataffect theconnective tissueCharacterized byextremely flexiblejoints and skinextensibilityResult of faultycollagenTypes and SymptomsThere are
Christopher Newport University - BIOL - 101
Kelly HayesMay 12, 2011Paper #1GalactosemiaGalactosemia is a metabolic disorder that results in the bodys inability to break down thesugar galactose. Galactose is a sugar produced from the breakdown of lactose to glucose, and isused as energy for th
Christopher Newport University - BIOL - 101
Kelly HayesMay 16, 2011Paper #2Phenylketonuria (PKU)Phenylketonuria, or PKU, is an autosomal recessive metabolic disorder that is indicatedby increased levels of phenylalanine in the blood. Phenylalanine is an essential amino acidfound in high-prote
Christopher Newport University - ECON - 100
SBS 110- EvolutionJanuary 11, 2010Peer Assisted Help- Monday 1-2 Francis Bancroft 3.16Recommended ReadingAn Introduction to Biological Evolution by KennethEvolution, an Introduction by Stephen StearnsLecture 1: Introduction and historical prospectiv