Because poor creditworthy customers may cause bad debt losses, credit sales to them should not be allowed. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
If we know the dividend stream, the future price of the stock, the future selling date of the stock, and the required return, we can price stocks just as we priced ________. A) annuities B) perpetuities C) bonds D) preferred stocks ANSWER Answer: C Explanation: C) Stocks can be priced just like bonds […]
Date: September 19th, 2020
Leonardo’s broker called him recently with an offer to buy Downliner Waterproof Furnishings Corp common stock for $40 per share. His broker promised to repurchase the shares in one year for $45 per share. If Leonardo accepts this deal, what is his required return? The stock is not expected to pay a dividend next year. […]
Date: September 19th, 2020
What if the company goes out of business in fifteen years and thus pays an annual dividend of $2.10 for only those fifteen years? What is the present value of a share for this company if we want a 10% return on the stock? A) $15.97 B) $16.97 C) $17.97 D) $18.97 ANSWER […]
Date: September 19th, 2020
Western Auto Inc. pays a $1.77 preferred dividend every quarter and will maintain this policy forever. What price should you pay for one share of preferred stock if you want an annual return of 9.25% on your investment? A) $66.54 B) $70.54 C) $74.54 D) $76.54 ANSWER Answer: D Explanation: D) We use […]
Date: September 19th, 2020
Simpson Industries Inc. pays a $1.37 dividend every quarter and will maintain this policy forever. What price should you pay for one share of common stock if you want an annual return of 12.5% on your investment? A) $43.84 B) $43.94 C) $44.84 D) $44.94 ANSWER Answer: A Explanation: A) We use the […]
Date: September 19th, 2020
Refer to the performance data for three mutual funds and the market portfolio in the following table. Which is the best investment based on its excess return per unit of systematic risk? AGF AIM Alta Market Risk-free 5 year return 0.1348 0.0784 0.0574 0.1361 0.02 Beta 1.35 1.02 0.78 1 0 Treynor Index ? 0.0573 […]
Date: September 19th, 2020
A firm’s credit and collection policies usually include A) average collection period, dollar value of aged receivables, and terms of sale. B) terms of sale, quality of customers, and collection of credit sales. C) terms of sale, level of credit sales, and collection of credit sales. D) terms of sale and collection of credit sales. […]
Date: September 19th, 2020
You buy a stock for which you expect to receive an annual dividend of $2.10 for the fifteen years that you plan on holding it. After 15 years, you expect to sell the stock for $32.25. What is the present value of a share for this company if you want a 10% A) $7.72 B) […]
Date: September 19th, 2020
The basic assumption of the Gordon growth model is that: A) Dividends will grow at a faster rate than the required return. B) No earnings will be retained by the firm to finance growth prospects. C) Bonds are perfect substitutes for common stock. D) Dividend payments will grow at a constant rate. E) The firm […]
Date: September 19th, 2020
