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Chap007.docxCHAPTER 7 Equity Markets and Stock
Chap007.docxCHAPTER 7 Equity Markets and Stock
Chap007.docxCHAPTER 7 Equity Marke...
Chap007.docxCHAPTER 7 Equity Markets and Stock
Page 16
SUPERNORMAL GROWTH STOCK (INTERMEDIATE)
e
76. Jones Brothers Clothing does not expect to pay any dividends for the next two years.
Three years from now they hope to pay $.25 a share and increase that amount by 100
percent per year for the following two years. After that, the dividend is expected to
increase in value by 2.5% annually. What is the value of this stock today if the
required return is 9 percent?
a.
$10.75
b.
$10.80
c.
$10.95
d.
$11.20
e.
$11.45
SUPERNORMAL GROWTH STOCK (INTERMEDIATE)
d
77. LoDo, Inc., is a specialty company in a niche market. Based on their latest
projections,
the company expects to increase their annual dividend by 40 percent per year for the
next two years and by 10 percent for the following year. After that, the company
plans to pay a constant dividend of $1.00 a share. The last dividend they paid was
$.40
a share. What should you expect to pay per share if the market rate of return on this
stock is 16 percent?
a.
$4.18
b.
$4.44
c.
$4.84
d.
$5.62
e.
$7.11
SUPERNORMAL GROWTH STOCK (INTERMEDIATE)
e
78. Nano Seconds is expected to pay an annual dividend of $1.00 a share this coming
year.
They are expected to increase their dividend by 50 percent per year for the following
two years and then maintain a constant dividend growth rate of 4 percent per year.
What is the value of this stock today if the required return is 14 percent?
a.
$16.99
b.
$17.05
c.
$18.69
d.
$18.96
e.
$19.34
DIVIDEND YIELD (BASIC)
e
79. A stock pays an $.80 dividend and has a market price of $20.40 a share. What is the
dividend yield?
a.
1.63 percent
b.
1.96 percent
c.
2.14 percent
d.
3.26 percent
e.
3.92 percent
Page 17
DIVIDEND YIELD (BASIC)
c
80. The required return on ABC stock is 14.5 percent and the dividend growth rate is 3
percent. The stock is currently selling for $30 a share. What is the dividend yield?
a.
3.83 percent
b.
9.00 percent
c.
11.50 percent
d.
15.00 percent
e.
17.50 percent
DIVIDEND YIELD (BASIC)
c
81. For the past five years, the price of Turtles, Inc., stock has been increasing at a rate
of
return
5 percent a year. Currently, the stock is priced at $42 a share and has a required
of 12 percent. What is the dividend yield?
a.
4.05 percent
b.
5.00 percent
c.
7.00 percent
d.
16.67 percent
e.
17.00 percent
CAPITAL GAINS YIELD (BASIC)
e
82. A stock has paid dividends of $.80, $.84, $.89, and $.94 over the past four years,
respectively. What is the capital gains yield?
a.
4.14 percent
b.
4.19 percent
c.
5.00 percent
d.
5.31 percent
e.
5.52 percent
CAPITAL GAINS YIELD (BASIC)
d
83. Dots and More pays an annual dividend of $1.10 per share and sells for $28.60 a
share
based on a market rate of return of 11 percent. What is the capital gains yield?
a.
6.89 percent
b.
7.01 percent
c.
7.08 percent
d.
7.15 percent
e.
7.27 percent
CAPITAL GAINS YIELD (BASIC)
c
84. Investors require a 10 percent rate of return on the common stock of Plants and
Trees,
Inc., which is selling for $51.30 a share. What is the growth rate of the firm if the
company plans to pay an annual dividend of $2.10 a share next year?
a.
5.37 percent
b.
5.49 percent
c.
5.91 percent
d.
6.08 percent
e.
6.50 percent
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