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Chapter08 - CHAPTER 8 The Characteristics and Valuation of...

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Chapter 8 Page1 CHAPTER 8 The Characteristics and Valuation of Stock Multiple Choice: Conceptual Required return Answer: e Diff: E 1. An increase in a firm's expected growth rate would normally cause the firm's required rate of return to a. Increase. b. Decrease. c. Fluctuate. d. Remain constant. e. Possibly increase, possibly decrease, or possibly remain unchanged. Required return Answer: d Diff: E 2. If the expected rate of return on a stock exceeds the required rate, Constant growth model 3. Which of the following statements is most correct? Constant growth model 4. Which of the following statements is most correct.
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Chapter 8 - Page 2 Constant growth model 5. A stock’s dividend is expected to grow at a constant rate of 5 percent a year. Which of the following statements is most correct? a. The expected return on the stock is 5 percent a year. b. The stock’s dividend yield is 5 percent. c. The stock’s price one year from now is expected to be 5 percent higher. d. Statements a and c are correct. e. All of the statements above are correct. Miscellaneous issues Answer: c Diff: E 6. Which of the following statements is most correct? Preemptive right
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