CH08AQZV7 - Chapter 08 Quiz A Student Name _ _ 1. Student...

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Chapter 08 Quiz A Student Name _________________________ Student ID ____________ ________ 1. The Morgan Co. has 750,000 shares of stock outstanding with a market price of $41.84 a share. You currently own 46,500 shares. The company has three open positions on their board of directors. You want to assure yourself of winning one of those seats assuming that no one else votes for you. The company uses cumulative voting. How much more must you invest in the Morgan Co. to assure yourself a seat on the board? a. $5,899,482 b. $7,845,042 c. $8,514,482 d. $13,744,482 ________ 2. Which one of the following statements is correct concerning equity securities? a. Preferred shareholders generally receive 10 votes for every share of stock they own. b. If a dividend payment is missed on a non-cumulative preferred stock, the missed payment must be paid prior to paying any common stock dividends. c. A 5.5 percent preferred stock pays a quarterly dividend of $5.50. d. The dividend growth model assumes that the required rate of return exceeds the growth rate. ________ 3. You would like to earn a 9.5 percent rate of return on a 7 percent preferred stock. How much are you willing to pay per share? a. $73.68 b. $76.65 c. $101.65 d. $135.71 ________ 4. The common stock of Neal’s Metal Works sells for $32.89 a share. The company recently paid their annual dividend of $1.80 per share and expects to increase this dividend by 2.5 percent annually. What is the rate of return on this stock? a. 5.61 percent b. 7.84 percent c. 7.97 percent d. 8.11 percent ________ 5. Mertyle, Inc. recently announced that their annual dividend will be increasing to $2.20 a share for next year with annual increases in the dividend amount of 1.75 percent thereafter. You require a 14.5 percent rate of return on this relatively risky security. How much are you willing to pay for one share of this stock? a. $16.48 b. $16.95 c. $17.25 d. $17.56 ________6. Carbon Fiber, Inc. is expected to pay annual dividends of $.60, $1.30, $1.80, and $2.00 a share over the next four years, respectively. After that, the dividend is expected to increase by 2 percent annually. What is one share of Carbon Fiber stock worth today if similar stocks are yielding a 9 percent return? a. $20.64 b. $23.39 c. $25.09 d. $27.35 ________ 7. The Ol’ Tech Co. last paid a $2.40 annual dividend. The market rate of return on this security is 13 percent and the market price is $28.70 a share. What is the expected growth rate of Ol’ Tech? a. 3.56 percent b. 4.28 percent c. 4.48 percent d. 5.07 percent ________ 8. Preferred stockholders are generally granted: I. the right to demand higher dividend payments if the inflation rate exceeds a pre-specified level. II.
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This note was uploaded on 05/29/2010 for the course FIN 325 taught by Professor Staff during the Spring '08 term at San Diego State.

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CH08AQZV7 - Chapter 08 Quiz A Student Name _ _ 1. Student...

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