Reference no: EM132555882

Question 1. An issue of preferred stock is paying an annual dividend of $1.50. The growth rate for the firm's common stock is 5%. What is the preferred stock price if the required rate of return is 7%? *

a) $21.43

b) $30.00

c) $22.50

d) $39.00

e) None of the above

Question 2. An issue of common stock's most recent dividend is $1; its growth rate is 5%. What is its price if the required rate of return is 10%?

a) $21

b) $87.5

c) $92.5

d) $31

e) None of the above

Question 3. An issue of common stock is selling for $57.20. The year-end 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) 8.06%

d) 7%

e) None of the above

Question 4. An issue of common stock has just paid a dividend of $2.00. Its growth rate is equal to 4%. If the required rate of return is 7%, what is its current price?

a) $19.04

b) $80.00

c) $69.33

d) $100

e) None of the above

Question 5. The common stock of Bruner Aeronautics sells for $80 a share. The stock expects to pay $2 per share next month when the annual dividend is distributed. The company has a established a pattern of increasing their dividends by 2% annually. What is the market rate of return on this stock?

a) 4.5%

b) 2.5%

c) 2%

d) 4%

e) None of the above

Question 6. If last dividend (D0) of stock Y was $2.25, g (which is constant) = 4%. If the stock price is $50, what is the stock's expected dividend yield for the coming year?

a) 4.12%

b) 4.68%

c) 4.99%

d) 5.13%

e) None of the above

Question 7. Suppose a firm is expected to increase dividends by 20% in one year and by 15% in two years. After that, dividends will increase at a rate of 5% per year indefinitely. If the next dividend is $1.20 and the required return is 20%, what is the price of the stock?

a) $ 6.51

b) $ 7.81

c) $ 8.67

d) $ 9.64

e) None of the above