annual dividend of an of tock is payin 7) is B) S30.00 Practice Qs-Chapter 10-Ch

Question

annual dividend of an of tock is payin 7) is B) S30.00 Practice Qs-Chapter 10-Chapter 17 C)$22.50 D) None of these 8) An issuc dividend is expected to be $2.32 assuming a constant growth rate of 4%. What is the required rate of return? A) 10.3% B) 10.1% C)8.1% D) None of these 9) An issue of common stock has just paid a dividend of $2.00 Its growth rate is expected to remain at 4%. If the required rate of return is 7%, what is its current price? A) S19.04 B) $80.00 C) S69.33 D) None of these 10) An 8 percent preferred stock with a market price of $110 per share and a S100 par value pays a cash dividend of A) $4.00 B) $8.00 C) $8.80 D) $80.00 1) A firm has issued cumulative preferred stock with a S100 par value and a 12 percent annual dividend. For the past two years the board of directors has decided not to pay a dividend. The preferred stockholders must be paid prior to paying the common stockholders. A) S O/share B) $12/share C) $24/share D) S36/share 12) Shares of stock currently owned by the firm's shareholders are called A) authorized. B) issued. C) outstanding. D) treasury shares. 13) Treasury stock resulto

Explanation / Answer

A / 1 B C D 2 8) 3 Current market rate of share $57.20 4 Year end dividend expected $2.32 5 Constant Growth Rate 4% 6 Required Rate of Return? 7 Year end expected yield $61.81 =C3*(1+C5)+C4 8 Net Return for the year $4.61 =C7-C3 9 Required Rate of Return= 8.1% =C8/C3 10 Answer shall be "C" 11 12 9) 13 Dividend paid just now $2.00 14 Expected growth rate 4% 15 Required rate of return 7% 16 Current market price ? 17 Dividend paid $2 equivalent to 3% $2.06 =C13/(1-3%) 18 If $1.94 is 3% then 100%=current market rate $68.73 =C17/3%*100% 19 Growth Rate 4% apply on current market rate $71.48 =C18*(1+4%) 20 Net increase in rate $2.75 21 Dividend received value $2.06 22 Total Net $4.81 23 Required rate of return 7.00% 24 Answer shall be "D" 25 10) 26 8% preferred Stock market price $110 27 Par value $100 28 Dividend shall bepaid on par value only $8.00 =C27*8% 29 Answer shall be "B" 30 11) 31 Preferred stock par value $100 32 Annual dividend 12% 33 Dividend not paid for last 2 years 2 years 34 Dividend due for two years $24 =C31*C32*2 35 Answer shall be "C" 36 12) 37 Answer shall be "C" Outstanding shares

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