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Unformatted text preview: Practice Questions for Final Practice Questions for Final Key 1. Home Canning Products common stock sells for $44.96 a share and has a market rate of return of 12.8 percent. The company just paid an annual dividend of $1.04 per share. What is the dividend growth rate? A. 8.29 percent B. 8.45 percent C. 9.23 percent D. 9.67 percent E. 10.25 percent AACSB: Analytic Bloom's: Application Difficulty: Basic Learning Objective: 81 Ross  Chapter 08 #75 Section: 8.1 Topic: Dividend growth rate 2. KL Airlines paid an annual dividend of $1.42 a share last month. The company is planning on paying $1.50, $1.75, and $1.80 a share over the next 3 years, respectively. After that, the dividend will be constant at $2 per share per year. What is the market price of this stock if the market rate of return is 10.5 percent? A. $15.98 B. $16.07 C. $18.24 D. $21.16 E. $24.10 AACSB: Analytic Bloom's: Analysis Difficulty: Intermediate Learning Objective: 81 Ross  Chapter 08 #81 Section: 8.1 Topic: Nonconstant dividends 3. Last year, Hansen Delivery paid an annual dividend of $3.20 per share. The company has been reducing the dividends by 10 percent annually. How much are you willing to pay to purchase stock in this company if your required rate of return is 11.5 percent? A. $1.92 B. $7.87 C. $13.40 D. $21.16 E. $24.08 AACSB: Analytic Bloom's: Application Difficulty: Basic Learning Objective: 81 Ross  Chapter 08 #91 Section: 8.1 Topic: Negative growth 4. Zylo, Inc. preferred stock pays a $7.50 annual dividend. What is the maximum price you are willing to pay for one share of this stock today if your required return is 9.75 percent? A. $32.26 B. $35.48 C. $72.68 D. $76.92 E. $79.81 P = $7.50/0.0975 = $76.92 AACSB: Analytic Bloom's: Application Difficulty: Basic Learning Objective: 81 Ross  Chapter 08 #97 Section: 8.1 Topic: Preferred stock 5. Miller Brothers Hardware paid an annual dividend of $1.15 per share last month. Today, the company announced that future dividends will be increasing by 2.6 percent annually. If you require a 12 percent rate of return, how much are you willing to pay to purchase one share of this stock today? A. $12.23 B. $12.55 C. $12.67 D. $12.72 E. $12.88 AACSB: Analytic Bloom's: Application Difficulty: Basic Learning Objective: 81 Ross  Chapter 08 #57 Section: 8.1 Topic: Stock price 6. The Stiller Corporation will pay a $3.80 per share dividend next year. The company pledges to increase its dividend by 2.4 percent indefinitely. How much are you willing to pay to purchase this company's stock today if you require a 6.9 percent return on your investment? A. $55.07 B. $63.09 C. $72.22 D. $78.47 E. $84.44 AACSB: Analytic Bloom's: Application Difficulty: Basic EOC #: 84 Learning Objective: 81 Ross  Chapter 08 #106 Section: 8.1 Topic: Stock price 7. Bonnie's Ice Cream is expecting its ice cream sales to decline due to the increased interest in healthy eating....
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 Spring '08
 Cai

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