Quiz Chapter 9 Answer Key

Quiz Chapter 9 Answer Key - CHAPTER 9 STOCKS AND THEIR...

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Multiple Choice: Problems Expected dividend yield Answer: c EASY 1 . If D 0 = $2.00, g (which is constant) = 6%, and P 0 = $40, what is the stock’s expected dividend yield for the coming year? a. 5.0% b. 5.1% c. 5.3% d. 5.6% Constant growth valuation Answer: a EASY 2 . A stock is expected to pay a dividend of $1 at the end of the year. The required rate of return is r s = 11%, and the expected constant growth rate is 5%. What is the current stock price? a. $16.67 b. $18.83 c. $20.00 d. $21.67 Nonconstant growth stock price Answer: a HARD 3 . The Ehrhardt Company's last dividend was $2.00. The dividend growth rate is expected to be constant at 3% for 2 years, after which dividends are expected to grow at a rate of 8% forever. Erhardt’s required return (r s ) is 12%. What is Erhardt's current stock price? a. $49.20 b. $51.40 c. $53.80 d. $55.10 Miscellaneous issues Answer: c MEDIUM 4 . Which of the following statements is CORRECT? a. If a company has two classes of common stock, Class A and Class B, the stocks may pay different dividends, but the two classes must have the same voting rights. b. An IPO occurs whenever a company buys back its stock on the open market. c. The preemptive right is a provision in the corporate charter that gives common stockholders the right to purchase (on a pro rata basis) new issues of common stock. d. The stock valuation model, P
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This note was uploaded on 12/16/2009 for the course FIN 300 taught by Professor Olander during the Spring '08 term at ASU.

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Quiz Chapter 9 Answer Key - CHAPTER 9 STOCKS AND THEIR...

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