44) Lakeside Sheet Metal is downsizing and plans on completely closing 3 years from now. The
firm’s liquidation plan calls for annual dividends of $3, $6, and $36 over the next 3 years,
respectively. What is the current value of this stock given a discount rate of 14 percent?
A) $26.94
B) $27.16
C) $28.46
D) $31.50
E) $36.29
45) Alpha Wood Interiors announced today that it is going out of business. As of today, no more
regular dividends will be paid. The firm will, however, pay two liquidating dividends. The first
will be paid one year from now in the amount of $15 a share. The second and final payment will
be paid two years from now at an estimated $40 a share. What is the value of this stock today at a
discount rate of 16 percent?
A) $38.76
B) $39.03
C) $41.41
D) $42.66
E) $44.01
46) Blue Water Tours just paid an annual dividend of $0.80 a share. The firm has a policy of
increasing the dividend by 3.5 percent annually. What is the current value of this stock at a
discount rate of 11.5 percent?
A) $9.52
B) $9.78
C) $9.91
D) $10.02
E) $10.35
47) Precision Engineering recently announced that its next annual dividend will be $1.20 per
share with later dividends increasing by 2.5 percent annually. What is the current value of this
stock to you if you require a 12 percent rate of return?
A) $12.63
B) $12.95
C) $13.05
D) $13.37
E) $13.72
48) The Barclay House increases its dividend each year. The next annual dividend is expected to
be $1.75 a share. Future dividends will increase by 4 percent annually. What is the current value
of this stock if the discount rate is 10 percent?
A) $28.91
B) $28.05
C) $28.78
D) $29.00
E) $29.17
49) Long Life Floors just paid an annual dividend of $0.82 a share and plans on increasing future
dividends by 2 percent annually. The discount rate is 15 percent. What will the value of this
stock be 5 years from today?
A) $6.96
B) $7.04
C) $7.10
D) $7.18
E) $7.25
50) Wilson’s Furniture is experiencing good growth so has decided to commence paying
dividends starting next year. The first dividend will be $0.50 a share with annual increases of 4
percent in the dividend amount. The discount rate is 10 percent. What will the value of this stock
be four years from now?
A) $8.50
B) $8.72
C) $9.03
D) $9.23
E) $9.75
51) The Back Room just paid an annual dividend of $1.50 a share. The firm expects to pay
dividends forever and to increase the dividend by 4.5 percent annually. What is the expected
value of this stock six years from now if the discount rate is 12 percent?
A) $27.22
B) $27.91
C) $28.06
D) $28.52
E) $29.08
52) Main Street Antiques is planning on paying an annual dividend of $2.20 per share next year.
The company is slowly downsizing and is decreasing its dividend by 3 percent annually. What is
the current value of this stock at a discount rate of 8 percent?
A) $18.86
B) $19.12
C) $19.78
D) $20.00
E) $20.57
53) You are considering buying shares of stock in the Steel Mill. The forecast for the firm is
steady growth over the next decade. The firm just paid its annual dividend of $1.42 per share and
has plans to increase that amount by 4 percent annually indefinitely. You require a 12.5 percent
return on this type of security. What is your estimate of the value of this stock ten years from
now?
A) $24.13
B) $24.38
C) $24.73
D) $25.06
E) $25.72
54) BP Industries stock is valued at $11.50 a share. The firm pays annual dividends at an
increasing rate of 3.0 percent annually. Next year’s dividend will be $1.15 per share. What is the
required return on this stock?
A) 10.00 percent
B) 11.50 percent
C) 12.60 percent
D) 13.00 percent
E) 14.80 percent
55) Wholesale Foods common stock is valued at $11.05 per share. The firm pays annual
dividends which increase at a constant rate. The last dividend paid was $1.20. The required
return is 12 percent. What is the dividend growth rate?
A) 1.03 percent
B) 1.67 percent
C) 3.47 percent
D) 3.59 percent
E) 4.00 percent
56) A stock sells for $12.36 a share and has a required return of 9 percent. Dividends are paid
annually and increase at a constant 3 percent per year. What is the amount of the last dividend
paid?
A) $0.46
B) $0.50
C) $0.59
D) $0.63
E) $0.72
57) Factory Stores pays annual dividends and increases those dividends by 3 percent each year.
The stock is currently valued at $11.80 a share and has a required return of 14 percent. You own
500 shares of this stock. What is the total amount of dividend income you should expect to
receive next year?
A) $649
B) $659
C) $672
D) $685
E) $699
58) The common stock of JL Recyclers has a required return of 12 percent and a current value of
$18.72. The company pays its dividend annually and increases the amount by 4 percent each
year. You own 300 shares of this stock. What was the total amount of the last dividend you
received?
A) $319
B) $360
C) $432
D) $480
E) $513
59) The Rug Barn has paid annual dividends of $1.30, $1.36, $1.40, $1.42, and $1.45 over the
last 5 years, respectively. What is the geometric average dividend growth rate?
A) 1.98 percent
B) 2.11 percent
C) 2.39 percent
D) 2.55 percent
E) 2.77 percent
60) A firm has paid annual dividends of $1.34, $1.43, $1.55, $1.62, $1.64, and $1.75 per share
over the past 6 years, respectively. What is the geometric average growth rate for these
dividends?
A) 5.19 percent
B) 5.28 percent
C) 5.48 percent
D) 5.57 percent
E) 5.74 percent
61) Over the past 5 years, DL Insulation has paid annual dividends of $1.40, $1.55, $1.70, $1.73,
and $1.77 per share. What is the geometric average dividend growth rate for this period?
A) 4.80 percent
B) 5.79 percent
C) 5.88 percent
D) 6.04 percent
E) 6.33 percent
62) The Brown Jug has paid annual dividends of $0.61, $0.64, $0.71, $0.82, and $0.88 per share
over the past 5 years, respectively. What is the geometric average dividend growth rate for this
period?
A) 8.51 percent
B) 8.97 percent
C) 9.10 percent
D) 9.59 percent
E) 10.21 percent
63) Dennison Mfg. pays annual dividends. For the past six years, the firm has paid dividends of
$1.10, $1.15 $1.20, $1.25, $1.30, and $1.35, respectively. What is the geometric average
dividend growth rate for this time period?
A) 3.51 percent
B) 4.18 percent
C) 4.94 percent
D) 5.07 percent
E) 6.03 percent
64) Over the past 4 years, a local firm has paid annual dividends of $1.52, $1.55, $1.60, and
$1.68. What is the arithmetic average dividend growth rate?
A) 2.69 percent
B) 2.98 percent
C) 3.24 percent
D) 3.40 percent
E) 3.62 percent
65) Blue Water Tours has paid annual dividends of $2.10, $2.12, $2.15, $2.15, and $2.22 over
the past 5 years, respectively. What is the arithmetic average growth rate for these dividends?
A) 1.08 percent
B) 1.41 percent
C) 1.57 percent
D) 1.70 percent
E) 1.73 percent
66) Knit ‘n Needle started paying dividends 4 years ago. The annual dividends thus far have been
$0.35, $0.38, $0.42, and $0.48, respectively. What is the arithmetic average dividend growth
rate?
A) 6.33 percent
B) 8.58 percent
C) 9.70 percent
D) 10.80 percent
E) 11.13 percent
67) Roy’s Markets has net income of $164,000. The firm has 200,000 shares of common stock
outstanding. The dividend for this year is $0.61 per share. What is the retention ratio?
A) 0.220
B) 0.256
C) 0.314
D) 0.774
E) 0.780
68) Detroit Imports has a dividend payout ratio of 40 percent and annual dividends of $2.60 per
share. What is the retention ratio?
A) 0.167
B) 0.208
C) 0.600
D) 0.735
E) 0.792
69) Home Interiors has net income of $258,000. The firm has decided to pay $140,000 of that
income out to the shareholders. What is the firm’s retention ratio?
A) 0.355
B) 0.412
C) 0.457
D) 0.588
E) 0.645
70) Art Supplies has a net income of $138,600. The firm has $1.25 million in assets and
$500,000 in liabilities. What is the return on equity?
A) 13.87 percent
B) 15.09 percent
C) 16.44 percent
D) 18.48 percent
E) 21.21 percent
71) Oak Supply has earnings per share of $1.22. The firm has $840,000 in equity and 60,000
shares of stock outstanding. What is the return on equity?
A) 7.92 percent
B) 8.71 percent
C) 9.09 percent
D) 9.47 percent
E) 10.36 percent
72) Western Adventures has earnings per share of $2.30 and dividends per share of $1.25. The
total equity of the firm is $850,000. There are 40,000 shares of stock outstanding. What is the
sustainable rate of growth?
A) 2.14 percent
B) 3.31 percent
C) 4.94 percent
D) 5.32 percent
E) 6.59 percent
73) The Grand Isle has 12,000 shares of stock outstanding at a market price of $31.60 per share.
The book value per share is $12.08. The firm has earnings per share of $1.86 and a dividend
payout ratio of 0.40. What is the firm’s sustainable rate of growth?
A) 8.88 percent
B) 9.24 percent
C) 9.71 percent
D) 10.57 percent
E) 10.86 percent
74) Wilkinson and Daughters has net income of $415,400, total assets of $2.2 million, and total
liabilities of $1.08 million. The company paid $270,000 in dividends. What is the firm’s
sustainable rate of growth?
A) 9.69 percent
B) 11.06 percent
C) 12.98 percent
D) 13.93 percent
E) 14.15 percent
75) The Watermelon Patch has a retention ratio of 0.75, dividends of $50,000, and total equity of
$3.5 million. What is the firm’s sustainable rate of growth?
A) 1.58 percent
B) 4.29 percent
C) 6.30 percent
D) 7.38 percent
E) 8.54 percent
76) Southern Foods just paid an annual dividend of $1.10 a share. Management estimates the
dividend will increase by 10 percent a year for the next four years. After that, the annual
dividend growth rate is estimated at 3.2 percent. The required rate of return is 12 percent. What
is the value of this stock today?
A) $12.55
B) $13.00
C) $14.54
D) $15.81
E) $16.21
77) The common stock of A.G. Tailor has a required return of 16 percent. The latest press release
stated that last year’s dividend was $0.90 per share and that future dividends will increase by 15
percent for the following 3 years. After that, the dividend growth rate will be 3 percent
indefinitely. What is one share of this stock worth to you today?
A) $8.42
B) $9.60
C) $10.26
D) $10.75
E) $12.03
78) Mountain View Nursery is a relatively young firm which just paid its first annual dividend of
$0.35 a share. Management projects dividend increases of 12 percent per year for five years
followed by a constant growth rate of 3 percent annually. What is this stock worth today if the
applicable discount rate is 11 percent?
A) $3.59
B) $4.66
C) $5.23
D) $6.01
E) $6.51
79) The last dividend paid by New Technologies was an annual dividend of $1.40 a share.
Dividends for the next 3 years will be increased at an annual rate of 8 percent. After that,
dividends are expected to increase by 3 percent each year. The discount rate is 16 percent. What
is the current value of this stock?
A) $10.40
B) $12.60
C) $13.33
D) $14.10
E) $15.55
80) Ultra Fine Furnishings is in the process of selling its peripheral businesses and focusing on
its upscale clients. In conjunction with this reorganization, the dividend will be decreased by 10
percent for the next three years. After that, the dividend will resume increasing at an annual rate
of 5 percent. The required return on this stock is 14 percent and the last dividend paid was $2.40
a share. What is one share of this stock worth today?
A) $17.34
B) $18.08
C) $18.35
D) $19.68
E) $20.72
81) Perry Adventures last annual dividend was $0.70 a share. The firm will increase the dividend
by 5 percent for the next 4 years and thereafter increase the dividend by 3 percent annually. What
is this stock worth today if the required return is 10 percent?
A) $10.38
B) $11.05
C) $11.30
D) $13.97
E) $14.08