answers finance - 35. Which of the following is a...

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35. Which of the following is a legitimate reason the valuation of common stock is generally harder than the valuation of bonds? I. Future cash flows on stocks are not known in advance. II. Common stocks don't have a maturity date. III. Common stock valuation is sensitive to estimates of the dividend growth rate. A) I only B) I and II only C) I and III only D) II and III only E) I, II, and III Ans: E Level: Basic Subject: Stock & Bond Valuation Type: Concepts 36. Which of the following is true about the differences between debt and common stock? A) Debt is ownership in a firm but equity is not. B) Creditors have voting power while stockholders do not. C) Periodic payments made to either class of security are tax deductible for the issuer. D) Interest payments are promised while dividend payments are not. E) Bondholders can also own equity, but not vice versa. Ans: D Level: Basic Subject: Debt vs. Equity Type: Concepts 37. You are considering investing in a firm and wish to place a value on the common stock. The dividend on the firm's stock has not changed in the last five years. Absent any information suggesting future changes in the dividend rate, the most appropriate stock valuation model would be the ___________ model. A) zero growth B) supernormal growth C) nonconstant growth D) growing perpetuity E) bond pricing Ans: A Level: Basic Subject: Common Stock Valuation Type: Concepts 38. Over the past four years, a company has paid dividends of $1.00, $1.10, $1.20, and $1.30, respectively. This pattern is expected to continue into the future. This is an example of a company paying a: A) Dividend that grows by 10% each year. B) Dividend that grows at a constant rate. C) Dividend that grows by a decreasing amount. D) Dividend that grows at a decreasing rate. E) Preferred stock dividend. Ans: D Level: Basic Subject: Dividend Growth Type: Concepts 39. Dividends on the common stock of Stable Inc. are expected to grow at a constant rate forever. If you are told Stable's most recent dividend paid, its dividend growth rate, and a discount rate, you can calculate ____________. I. the price today II. the price five years from now III. the dividend that is expected to be paid 10 years from now A) I only
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B) I and II only C) I and III only D) II and III only E) I, II, and III Ans: E Level: Basic Subject: Dividend Growth Model Type: Concepts 40. Which of the following is (are) true? I. The dividend growth model only holds if, at some point in time, the dividend growth rate exceeds the stock's required return. II. A decrease in the dividend growth rate will increase a stock's market value, all else the same. III. An increase in the required return on a stock will decrease its market value, all else the same. A)
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answers finance - 35. Which of the following is a...

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