test5 - Chapter 5Valuing Stocks MULTIPLE CHOICE 1 The first...

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Chapter 5—Valuing Stocks MULTIPLE CHOICE 1. The first public sale of company stock to outside investors is called a/an a. seasoned equity offering. b. shareholders’ meeting. c. initial public offering. d. proxy fight. ANS: C DIF: E REF: 5.2 Primary Markets and Issuing New Securities 2. Which statement about common shareholders is incorrect? 3. What is the market capitalization of a company? 4. Which of the following is not a difficulty associated with valuing common stock? 5. Which of the following stock exchanges has the most strict listing requirements? a. American Stock Exchange b. NASDAQ c. New York Stock Exchange d. Pacific Stock Exchange ANS: C DIF: E REF: 5.3 Secondary Markets for Equity Securities 6. Bavarian Sausage, Inc. has preferred stock outstanding. This stock pays a semiannual dividend of $1.25. If the next dividend is paid six months from now and the annual required return is 10%, what should be the value of the preferred stock?
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DIF: M REF: 5.4 Stock Valuation 7. Bavarian Sausage just paid a $1.57 dividend and investors expect that dividend to grow by 5% each year forever. If the required return on the stock investment is 14%, what should be the price of the stock today. DIF: E REF: 5.4 Stock Valuation 8. Bavarian Sausage is expected to pay a $1.57 dividend next year and investors expect that dividend to grow by 5% each year forever. If the required return on the stock investment is 14%, what should be the price of the stock today. DIF: E REF: 5.4 Stock Valuation
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