TestReview2

# TestReview2 - Chapter 4 The Value of Common Stocks Multiple...

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Chapter 4 The Value of Common Stocks Multiple Choice Questions 1. If the Vol. 100s is reported as 10,233 in the Wall Street Journal quotation, then the trading volume for that day of trading is: A) 10,233 shares B) 102,330 shares C) 1,023,300 shares D) 10,233,000 shares Answer: C Type: Medium Page: 60 Response: Trading volume = 10,233 * 100 = 1,023,300 2. The dividend yield reported as Yld. % in The Wall Street Journal quotation is calculated as follows: 3. The Wall Street Journal quotation for a company has the following values: Div: 2.28, PE: 19, Close: 75.30. Calculate the dividend pay out ratio for the company. 50

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4. If the Wall Street Journal Quotation for a company has the following values close: 26.00; Net chg: =+1.00; then the closing price for the stock for the previous trading day was? 5. The value of a common stock today depends on: A) Number of shares outstanding and the number of shareholders B) The Wall Street analysts C) The expected future dividends and the discount rate D) Present value of the future earnings per share Answer: C Type: Easy Page: 62 6. Super Computer Company's stock is selling for \$100 per share today. It is expected that this stock will pay a dividend of 5 dollars per share, and then be sold for \$120 per share at the end of one year. Calculate the expected rate of return for the shareholders. 7. PC Company stockholders expect to receive a year-end dividend of \$10 per share and then be sold for \$122 dollars per share. If the required rate of return for the stock is 20%, what is the current value of the stock? 51
8. Macrohard Company expects to pay a dividend of \$6 per share at the end of year one, \$8 per share at the end of year two and then be sold for \$136 per share. If the required rate on the stock is 20%, what is the current value of the stock? 9. The constant dividend growth formula P 0 = D 1 /(r-g) assumes: A) The dividends are growing at a constant rate g forever. B) r > g C) g is never negative. D) Both A and B Answer: D Type: Medium Page: 64

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