Finding stock price and preferred and common stock value

Reference no: EM1355104

1.The current price of DEF Corporation stock is $26.50 per share. Earnings next year should be $2 per share and it should pay a $1 dividend. The P/E multiple is 15 times on average. What price would you expect for DEF's stock in the future?

1. $15.00
2. $30.00
3. $26.50
4. $13.50

2.The opportunity for management to purchase a certain number of shares of their firm's common stock at a specified price over a certain period of time is a

1. pre-emptive right.
2. stock option.
3. stock right.
4. warrant.

3. All of the following are characteristics of preferred stock EXCEPT

1. it gives the holder voting rights which permit selection of the firm's directors.
2. it has less restrictive covenants than debt.
3. it is often considered quasi-debt due to fixed payment obligation.
4. its holders have priority over common stockholders in the liquidation of assets.

4.Nico Corporation's common stock currently sells for $160 per share. Nico just paid a dividend of $10.18 and dividends are expected to grow at a constant rate of 6 percent forever. If the required rate of return is 12 percent, what will Nico Corporation's stock sell for one year from now?

1. $155.45
2. $193.80
3. $187.04
4. $179.83

5.Julian is considering purchasing the stock of Pepsi Cola because he really loves the taste of Pepsi. What should Julian be willing to pay for Pepsi today if it is expected to pay a $2 dividend in one year and he expects dividends to growth at 5 percent indefinitely? Julian requires a 12 percent return to make this investment.

1. $31.43
2. $28.57
3. $43.14
4. $29.33

6.Jack wants to determine if Tangshan Inc. stock is fairly valued at $110.00 per share. The firm's dividends are expected to grow at 5 percent indefinitely. Assuming Tangshan China's most recent dividend was $5.50, and the required return on the stock was 14 percent, what is the value of Tangshan's stock?

1. $46.71
2. $110.00
3. $64.17
4. $18.75

7. A firm has an expected dividend next year of $1.20 per share, a zero growth rate of dividends, and a required return of 10 percent. The value of a share of the firm's common stock is ________.

1. 1. $100
2. 2. $12
3. 3. $10
4. 4. $120

8. All of the following are examples of standard debt provisions EXCEPT

1. maintaining all facilities in good working order.
2. maintaining satisfactory accounting records.
3. limiting the annual dividend payment.
4. paying taxes and liabilities when due.

Reference no: EM1355104

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