MGNT 3125_Chapter 9_reviewquestions

MGNT 3125_Chapter 9_reviewquestions - MGNT 3125 Fall 2010...

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MGNT 3125 Fall 2010 Dr. Amine Khayati Chapter 9 Review questions 1 - The total return on a share of stock has two components: the dividend yield and the capital gains yield. a- true b- false 2 - The value of a share of common stock equals the present value of future…………. . plus the present value of the future ………………. . value of a share. a- dividends; market b- coupon payment; accounting c- dividends; principal d- earnings; market 3 - Unlike the valuation of bonds, the valuation of common stocks is difficult because: a- there are voting rights associated with common stocks b- common stocks are sold and bought on a more transparent market c- the cash flows associated with common stocks are easier to predict d- the cash flows from common stocks have more uncertainty and variability associated with them. 4 - Which of the following is a reason why the valuation of stocks is harder than the valuation of bonds: I- dividend payments are not fixed over time and can change substantially over time II- a share of common stock has neither a maturity date nor a maturity value III- common stock markets are relatively less transparent than bond markets IV- future cash flows on stocks are not known in advance and the valuation is sensitive to estimates in dividend growth rate. a- I and II only b- I , II and III only c- I, II and IV only d- I , II , III, and IV 5 - The stock valuation method that determines the price of a stock by dividing the next period’s dividend by the discount rate less the dividend growth rate is called the: a- stock pricing formula b- capital gain model c- zero growth model d- dividend growth model 1
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6 - A stock that is assumed to pay a constant dividend for ever is called a ………………. . stock. a- regular b- constant c- zero growth d- fixed 7 - Which of the following is true regarding the dividend growth model? I-
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MGNT 3125_Chapter 9_reviewquestions - MGNT 3125 Fall 2010...

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