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
You are considering investing in Stock ABC. This stock has an expected return of 14%, the risk free rate is 5%, and the market risk premium (or Treynor Index) is 8%. What is the beta of Stock ABC? A) 0.950 B) 1.125 C) 1.250 D) 1.400 E) 1.500 ANSWER B
Date: September 19th, 2020
If a firm with credit terms of 2/10 net 30 were to change its terms to 2/10 net 60, the result would probably be A) a reduction in safety stock. B) increased accounts receivable turnover. C) more customers would take advantage of the cash discount. D) fewer customers would take advantage of the cash discount. […]
Date: September 19th, 2020
Crosby Inc. has an 11% required rate of return. It does not expect to initiate dividends for 20 years, at which time it will pay $4.00 per share in dividends. At that time, Crosby expects its dividends to grow at 6% forever. What is an estimate of Crosby’s price in 20 years (P20) if its […]
Date: September 19th, 2020
What is the maximum price Erica should pay for Rangoon Corp. common stock if her required return is 5% and she expects to sell the stock in one year for $50 per share, immediately after she receives a $.50 per share dividend? (Round to the nearest tenth.) A) $50.00 B) $48.10 C) $48.00 D) $45.00 […]
Date: September 19th, 2020
If we believe that a company is following a constant dividend policy, we can then use the current dividend to predict all future dividends because they are the same. Indicate whether the statement is true or false. ANSWER Answer: TRUE
Date: September 19th, 2020
If the last dividend on Markowitz Trucking stock was $2 per share and if dividends are expected to grow 10% annually, what is the share price if the required return is 12%? A) $100 B) $155 C) $110 D) $125 E) $130 ANSWER C
Date: September 19th, 2020
