1882 Words8 Pages

Sample quiz 2: Fin 819
1. 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 Super Computer Company ‘s stock. A) 20% B) 25% C) 10% D) 15% E) None of the above
Answer: B Response: r = (120+5-100)/100 = 25%
2. 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? A) $100 B) $122 C) $132 D) $110 E) None of the above
Answer: D Response: P = (122+10)/1.2 = 110
3. The constant dividend growth formula P0 = D1/(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 E) None of the above
Answer: D
4. Casino Co. is expected to pay a dividend of $6 per share at the end of year one and these dividends are expected to grow at a constant rate of 8% per year forever. If the required rate of return on the stock is 20%, what is the current value of the stock today? A) $30 B) $50 C) $100 D) $54 E) None of the above
Answer: B Response: P = (6/(0.2-0.08) = 50
5. WorldTour Co. has just now paid a dividend of $6 per share (Do), the dividends are expected to grow at a constant rate of 5% per year forever. If the required rate of return on the stock is 15%, what is the current value on stock (after paying the dividend)? A) $63 B) $56 C) $40 D) $48 E) None of the above
Answer: A Response: P = (6*1.05)/(0.15 0.05) = 63
6. The required rate of return or the market capitalization rate is estimated as follows: A) Dividend yield +

Related

## Fin515 Essay

504 Words | 3 PagesIf the required return on this preferred stock is 6.5%, at what price should the preferred stock sell? =Preference Dividend/ Required Return= $7.5/ 6.5%= $ 115.38 13. The Isberg Company just paid a dividend of $0.75 per share, and that dividend is expected to grow at a constant rate of 5.50% per year in the future. The company's beta is 1.15, the market risk premium is 5.00%, and the risk-free rate is 4.00%. What is the company's current stock price, P0?

## Accounting 404 Essay

318 Words | 2 PagesNick’s Enchiladas Incorporated has preferred stock outstanding that pays a dividend of $5 at the end of each year. The preferred sells for $50 a share. What is the stock’s required rate of return? A company currently pays a dividend of $2 per share (D0 = $2). It is estimated that the company’s dividend will grow at a rate of 20% per year for the next 2 years, then at a constant rate of 7% thereafter.

## Shalit Corporation's 2008 Sales Were $ 12 Million

574 Words | 3 PagesWith a calculator, enter N = 5, PV = -6, PMT = 0, FV = 12, and then solve for I/YR = 14.87%. Must put the PV as a negative or an error will occur. b. Suppose someone made this statement: “Sales doubled in 5 years. This represents a growth of 100% in 5 years; so dividing 100% by 5, we find the growth rate to be 20% per year.” Is that statement correct?

## Discounted Cash Flow Analysis

810 Words | 4 PagesPart a: 16105.1; Part b: 12762.82, 20113.57 3. It is estimated that in 5 years the total cost for one year of college will be $20,000. a. How much must be invested today in a CD paying 10.0 percent annual interest in order to accumulate the needed $20,000? 12418.43 b.

## Finance Problems Essay

1765 Words | 8 Pagesc. Internal common equity where the current market price of the common stock is $43.50. The expected dividend this coming year should be $3.25, increasing thereafter at a 7% annual growth rate. The corporation’s tax rate is 34%. d. A preferred stock paying a 10% dividend on a $125 par value. If a new issue is offered, flotation costs will be 12% of the current price of $150.

## Adv Accounting Chapter 1

8940 Words | 36 Pages$24,000 B. $75,000 C. $99,000 D. $51,000 E. $80,000 Difficulty: Easy 3. On January 1, 2008, Pacer Company paid $1,920,000 for 60,000 shares of Lennon Co.'s voting common stock which represents a 45% investment. No allocation to goodwill or other specific account was made. Significant influence over Lennon was achieved by this acquisition.

## Sad Solution Essay

511 Words | 3 PagesProduct #1 is expected to earn no profit in the first year, $500 in the second year and $1,000 in the third year. Product #2 is expected to earn $500 per year for three years. Assume your cost of capital is 10%. Which product should you make? Present Value of #1 = $0 +

## Ch 17 Cost Accounting

13285 Words | 54 Pagesd. increase by $1,400. status: incorrect (0.0) correct: a your answer: b feedback: Incorrect. [600 × $3] - [700 × ($8 - $6)] = $400 decrease ________________________________________ 3 The following information pertains to the Norfolk Company's three products: Assume that Product C is discontinued and the extra space is devoted to the production of Product A. Product A production is increased to 500 units per year, but the selling price on all units of A is reduced to $7.00. Assuming everything

## Bless Me Ultima

660 Words | 3 PagesPMT = (.1085/2)*1000=54.25 N = 60 R = 0.09/2=0.045 (or 4.5 for calculator purposes) FV = 1000 PV =? Answer: 1,190.90 b.What is the value of this bond 10 years after it was issued? PMT = (.1085/2)*1000=54.25 N = 40 R = 0.09/2=0.045 (or 4.5 for calculator purposes) FV = 1000 PV =? Answer: 1170.20 The price will decrease as approaching maturity since at maturity (just before expiration) it will be worth the par ($1,000) since this is a premium bond. 2.Suppose your company needs to raise $30 million and you want to issue 30-year bonds for this purpose.

## Eastman Kodak Company: Funtime Film

638 Words | 3 PagesTo drive both market share and earnings Kodak proposed to introduce a new brand “Funtime” at Fuji and Konica’s price level, setting it 20% below the price of Kodak’s flagship Gold Plus brand. It is believed that other “price brands” on average are about 30% less than Kodak Gold Plus. With no advertising support, the Funtime would be sold twice a year at off-peak film use times and available in limited quantities, packaged only in “value packs”. Gold Plus would remain flagship brand with 60% of the dollar advertising support. Royal Gold would be the new name for the products in Superpremium segment with recommended retail prices at 20% above Gold Plus.

### Fin515 Essay

504 Words | 3 Pages### Accounting 404 Essay

318 Words | 2 Pages### Shalit Corporation's 2008 Sales Were $ 12 Million

574 Words | 3 Pages### Discounted Cash Flow Analysis

810 Words | 4 Pages### Finance Problems Essay

1765 Words | 8 Pages### Adv Accounting Chapter 1

8940 Words | 36 Pages### Sad Solution Essay

511 Words | 3 Pages### Ch 17 Cost Accounting

13285 Words | 54 Pages### Bless Me Ultima

660 Words | 3 Pages### Eastman Kodak Company: Funtime Film

638 Words | 3 Pages