The dividend stream we would have legal claim to is for only that period of the company’s life during which we own the stock or until the company goes out of business and stops paying dividends Indicate whether the statement is true or false. ANSWER Answer: TRUE
Date: September 19th, 2020
One year ago Indigo Company paid a $4 dividend, and during the current year it has experienced a 10% growth rate. The company just paid a dividend of $4.40, i.e., D(o) = 4.40. Due to a new, advanced production technique, Indigo expects to achieve a dramatic increase in its short-term growth rate, to 25% annually […]
Date: September 19th, 2020
Berg Inc. has just paid a dividend of $2. Its stock is now selling for $48 per share. The firm is half as risky as the market. The expected return on the market is 14%, and the yield on U.S. Treasury bonds is 11%. If the market is in equilibrium, what rate of growth is […]
Date: September 19th, 2020
A Silver Hummer H3 sells for $98,000 tax included. GMAC lends money at the rate of 6.9% APR. You are at the beginning of the fourth year of a seven year term. You are making monthly payments on the loan. How much interest do you pay in the first month of the fourth year of […]
Date: September 19th, 2020
Fred’s Frankfurters has an expected return of 18.9%. The market has an expected return of 13.5%. If the risk free rate is 5%, calculate the Treynor Index. (Round to two decimal places) A) 13.90% B) 5.40% C) 5.18% D) 8.48% E) 7.50% ANSWER D
Date: September 19th, 2020
Maris Motors Co. pays a $2.15 dividend every quarter for its perpetual stock. If you expect an annual return of 8.75% on your investment, compute the stock price that you would be willing to pay, using quarterly data. Now compute the value using annual data. Explain your two answers. What would you be willing to […]
Date: September 19th, 2020
If a firm with credit terms of 1/10 net 30 were to change its terms to 3/10 net 30, the result would probably be A) increased bank loans. B) an increase in the average level of accounts receivable. C) increased accounts receivable turnover. D) a decrease in accounts payable. ANSWER C
Date: September 19th, 2020
Central Inc. has an 11.5% required rate of return. It does not expect to initiate dividends for 20 years, at which time it will pay $3.75 per share in dividends. At that time, Central expects its dividends to grow at 6% forever. What is an estimate of Central’s price in 20 years (P20) if its […]
Date: September 19th, 2020
Pinecrest Inc. has a 13% required rate of return. It does not expect to initiate dividends for 10 years, at which time it will pay $5 per share in dividends. At that time Pinecrest expects its dividends to grow at 5% forever. What is an estimate of Pinecrest’s price in 10 years (P10) if its […]
Date: September 19th, 2020
The last dividend on Spirex Corporation’s common stock was $4.00, and the expected growth rate is 10%. If you require a rate of return of 20%, what is the highest price you should be willing to pay for this stock? A) $44.00 B) $38.50 C) $40.00 D) $45.69 E) $50.00 ANSWER A
Date: September 19th, 2020
