Question Details

What is the company's current stock price 



1.	For a common stock with the current dividend amount of = $.70 (Do = .70), what is the (P)V of it with an annual discount rate of 12% and the dividend is expected to grow at the rate of 10% per annum forever? 

a.	$33.5
b.	$35.0
c.	$38.5
d.	$45.0
e.	$37.5 

2.	The preemptive right is important to shareholders because it

a.	allows managers to buy additional shares below the current market price.
b.	will result in higher dividends per share.
c.	is included in every corporate charter.
d.	protects the current shareholders against a dilution of their ownership interests.
e.	protects bondholders, and thus enables the firm to issue debt with a relatively low interest rate.
	
3.	Which of the following statements is CORRECT? 

a.	The constant growth model takes into consideration the capital gains investors expect to earn on a stock.
b.	Two firms with the same expected dividend and growth rate must also have the same stock price.
c.	It is appropriate to use the constant growth model to estimate a stock's value even if its growth rate is never expected to become constant.
d.	If a stock has a required rate of return rs = 12%, and if its dividend is expected to grow at a constant rate of 5%, this implies that the stock- dividend yield is also 5%.
e.	The price of a stock is the present value of all expected future dividends, discounted at the dividend growth rate.
	
4.	The Francis Company is expected to pay a dividend of D1 = $1.25 per share at the end of the year, and that dividend is expected to grow at a constant rate of 6.00% per year in the future.  The company's beta is 1.15, the market risk premium is 5.50%, and the risk-free rate is 4.00%.  What is the company's current stock price ?

a.	$28.90
b.	$29.62
c.	$30.36
d.	$31.12
e.	$31.90
	
5.	Goode Inc.'s stock has a required rate of return of 11.50%, and it sells for $25.00 per share.  Goode's dividend is expected to grow at a constant rate of 7.00%.  What was the last dividend, D0?

a.	$0.95
b.	$1.05
c.	$1.16
d.	$1.27
e.	$1.40



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