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53) Mario's is going to pay $1, $2.65, and $4 a share over the next 3 years, respectively. After that,
the company plans to pay annual dividends of $1.65 per share indefinitely. If your required return
is 14 percent, how much are you willing to pay for one share today?
A) $12.74
B) $14.02
C) $12.90
D) $13.57
E) $13.67
54) Dille Inc. pays no dividend at the present time. In Years 2 and 3, the firm will pay annual
dividends of $4 a share. After that, it will pay a constant $2 a share dividend indefinitely. What is
this stock worth at a required return of 17 percent?
A) $12.29
B) $11.81
C) $12.77
D) $12.50
E) $11.07
55) New Tours last annual dividend was $2 a share. The company plans to lower the dividend by
$.30 each year for the next 3 years. In Year 5, it will pay a final liquidating dividend of $17 a share.
If the required return is 22 percent, what is the current per share value of this stock?
A) $9.23
B) $13.08
C) $10.61
D) $14.13
E) $8.86
56) Midtown Enterprises paid its first annual dividend yesterday in the amount of $.26 a share. The
company plans to double each annual dividend payment for the next 3 years. After that, it will pay
a constant $2.40 per share dividend indefinitely. What is one share of this stock worth today if the
market rate of return on similar securities is 14.5 percent?
A) $10.79
B) $11.40
C) $14.08
D) $12.93
E) $13.66
57) General Stores recently announced that it will pay annual dividends of $1.05, $.80, and $.50
over the next 3 years, respectively. The following year, the firm will close and pay a final dividend
of $11.30 a share. What is one share of this stock worth today at a discount rate of 16.6 percent?
A) $8.24
B) $7.21
C) $7.92
D) $6.72
E) $6.81
58) Last week, Railway Cabooses paid its annual dividend of $1.12 a share. The company has been
reducing its dividends by 4 percent each year. What is one share of stock worth at a required return
of 17 percent?
A) $4.06
B) $5.12
C) $6.80
D) $8.27
E) $7.90
59) Feltwater Furniture has 134,000 shares of stock outstanding. The firm expects to earn net
income of $286,000 next year with annual increases of 4 percent per year thereafter. The firm pays
out 70 percent of its net income in dividends. The required return is 16 percent. What is the share
price?
A) $14.16
B) $12.45
C) $13.08
D) $12.95
E) $14.63
60) CS Markets has 84,500 shares of stock outstanding. The firm paid out $68,200 in dividends
this year and expects their total dividends to increase by 3.5 percent per year. The required return is
12 percent. What is the share price?
A) $8.47
B) $9.83
C) $6.20
D) $7.64
E) $9.50
61) Nu-Tek, Inc. is expecting a period of intense growth, so it has decided to reduce its annual
dividend by 10 percent a year for the next 3 years. After that, it will maintain a constant dividend of
$1.90 a share. Last year, the annual dividend was $2.70 a share. What is the market value of this
stock if the required rate of return is 15 percent?
A) $13.86
B) $13.39
C) $14.88
D) $14.23
E) $14.15
62) Webster preferred stock pays an annual dividend of $6.20 a share. What is the maximum price
you should pay today to purchase this stock if you desire a rate of return of 14.25 percent?
A) $40.12
B) $43.51
C) $46.50
D) $51.88
E) $55.02
63) An investor wants to purchase shares in a firm that has no growth opportunities but pays an
annual dividend of $2.35. The market rate of return on similar securities is 17.5 percent. What is
the maximum price the investor should pay for this stock?
A) $14.52
B) $12.88
C) $13.43
D) $12.76
E) $13.18
64) DOC just paid a dividend of $.46 a share. The dividends are expected to increase by 30 percent
a year for the next 2 years and then increase by 2 percent annually thereafter. What is the current
value of a share if the appropriate discount rate is 15 percent?
A) $5.72
B) $6.91
C) $5.38
D) $6.26
E) $6.42
65) Nu-Tech stock's last annual dividend was $1.10 a share. Dividends are expected to increase by
15 percent for the next 2 years and then increase at a constant 3 percent annually. The required
return is 17.5 percent. What is the current value per share?
A) $11.09
B) $10.33
C) $9.28
D) $10.63
E) $9.62
66) ALP Inc. has decided to issue preferred stock with an annual dividend of $5 a share. Similar
stocks are currently yielding 14 percent. What price should the firm expect to receive for each new
share issued?
A) $35.71
B) $33.08
C) $44.92
D) $40.71
E) $38.97
67) The Vineyard recently paid an annual dividend of $2.78. This dividend increases at 1.65
percent per year and currently sells for $42.19 a share. What is the rate of return?
A) 8.21%
B) 8.41%
C) 8.46%
D) 8.35%
E) 8.28%
68) Nu Tek's next annual dividend will be $4.26 a share and all later dividends are expected to
increase by 4.4 percent annually. What is the rate of return if this stock is currently selling for
$48.74 a share?
A) 10.76%
B) 11.98%
C) 13.14%
D) 13.67%
E) 12.87%
69) Shares of ABT stock offer an expected total return of 14.6 percent. What is the dividend yield
if the dividend increases by 2.8 percent annually?
A) 17.40%
B) 13.20%
C) 11.80%
D) 8.74%
E) 12.80%
70) Last year, Grenville common stock had a rate of return of 15.84 percent, a fixed annual
dividend of $2.65 a share, and a dividend yield of 2.7 percent. What was the rate of price
appreciation on the stock?
A) 13.50%
B) 12.48%
C) 12.75%
D) 13.14%
E) 13.85%
71) A common stock pays an annual dividend of $3.40 and sells for $51.20 a share. What is the
total expected rate of return if the dividend yield represents 40 percent of the total return?
A) 17.74%
B) 16.60%
C) 14.50%
D) 15.49%
E) 14.17%
72) Janlea Co. had total net earnings of $158,600 this past year and paid out 60 percent of those
earnings in dividends. There are 84,000 shares of stock outstanding at a current market price of
$18.43 a share. If the dividend growth rate is 2.8 percent, what is the required rate of return?
A) 14.27%
B) 12.56%
C) 8.95%
D) 10.40%
E) 11.60%
73) Snider's Hardwoods has a dividend payout ratio of 45 percent, a return on assets of 9.4 percent,
and a debt-equity ratio of 0.38. What is the firm's rate of growth?
A) 6.78%
B) 7.39%
C) 7.13%
D) 6.55%
E) 4.10%
74) Primary Colors has a debt-equity ratio of 0.56, a return on assets of 8.2 percent, and a dividend
payout ratio of 45 percent. What is the firm's rate of growth?
A) 6.04%
B) 6.52%
C) 8.13%
D) 7.04%
E) 7.26%
75) Tall Tree Timber has annual net income of $213,640 and 72,000 shares of stock outstanding.
Big Trees is a similar firm with similar growth opportunities that has 75,000 shares of stock
outstanding with a market price of $31.80 a share and earnings per share of $1.48. What is the
estimated value of Tall Tree Timber?
A) $3,603,208
B) $4,590,373
C) $5,009,046
D) $4,087,082
E) $3,874,298
76) The Yarn Outlet has net income of $87,400 for the year with 6,500 shares of stock outstanding.
Big Knitter is a similar firm with similar growth opportunities that has 8,400 shares of stock
outstanding with a market price of $9.34 a share and earnings per share of $.86. What is the
estimated value of the Yarn Outlet?
A) $1,016,279
B) $837,040
C) $1,142,105
D) $751,620
E) $949,205
77) SK Enterprises has total assets of $421,800, outstanding debt of $129,000, cash of $18,700,
sales of $387,400, costs of $241,900, and depreciation of $31,200. The firm has 11,300 shares of
stock priced at $34.40 a share. What is the firm's EV to EBITDA ratio?
A) 4.08
B) 3.43
C) 4.27
D) 3.67
E) 3.82
78) Lassiter Motors has a debt-equity ratio of 0.45 and total debt of $186,000. The firm's
market-to-book ratio is 2.6. The earnings before interest and taxes is $69,200, interest is $26,400,
depreciation and amortization total $87,100, and the tax rate is 34 percent. What is the firm's EV to
EBITDA ratio if the firm has $31,000 in cash?
A) 7.34
B) 5.47
C) 6.01
D) 6.38
E) 7.87
79) Duncan Street Mills is an all-equity firm with 28,000 shares of stock outstanding. The firm
expects sales of $400,000 next year. Sales are expected to grow by 5 percent for the following 2
years and then level off to a constant 3 percent growth rate. Net cash flow varies in direct
proportion to sales and is currently equal to 15 percent of sales. The required return for this firm is
16 percent. What is the estimated current value of one share of stock?
A) $17.02
B) $16.21
C) $16.94
D) $18.76
E) $17.34
80) Hanover Inc. is an all-equity firm with 35,000 shares of stock outstanding. The firm expects
sales of $750,000 next year. Sales are expected to grow by 10 percent the following year and then
level off to a constant 4 percent growth rate. Net cash flow varies in direct proportion to sales and
is currently equal to 17 percent of sales. The required return for this firm is 14 percent. What is the
estimated current value of one share of stock?
A) $38.35
B) $36.21
C) $34.71
D) $35.20
E) $36.71
81) Duncan Street Mills is an all-equity firm with 32,000 shares of stock outstanding. The firm
expects sales of $520,000 next year. Sales are expected to grow by 8 percent for the following 2
years and then level off to a constant 3 percent growth rate. Net cash flow varies in direct
proportion to sales and is currently equal to 16 percent of sales. The required return is 17 percent.
What is the estimated current value of one share of stock?
A) $20.10
B) $22.03
C) $18.94
D) $19.76
E) $18.01
82) Hanover Inc. is an all-equity firm with 27,500 shares of stock outstanding. The firm expects
sales of $429,000 next year. Sales are expected to grow by 30 percent the following year and then
level off to a constant 6 percent growth rate. Net cash flow varies in direct proportion to sales and
is currently equal to 21 percent of sales. The required return for this firm is 18 percent. What is the
estimated current value of one share of stock?
A) $32.85
B) $36.21
C) $30.71
D) $35.20
E) $31.19
83) Theo owns 49,800 of the 120,000 outstanding shares of BBE Inc. The share price is $28.64.
Each share is granted one vote for each open seat on the board of directors. Currently, there are
three open seats. Theo wants to be on the board and is assuming that no one, other than himself,
will vote for him. How much additional money, if any, must he invest in BBE to guarantee his
election if the firm uses a straight voting system?
A) $0
B) $287,403.64
C) $292,128.00
D) $292,156.64
E) $287,375.00
84) Poplar Trees Inc. has 48,300 shares of stock outstanding, and each share receives one vote for
each open seat on the board of directors. There are five open seats at this time. How many shares
must you control if the firm uses straight voting to guarantee your personal election to the board?
A) 24,151 shares
B) 9,661 shares
C) 12,076 shares
D) 24,150 shares
E) 8,051 shares
85) Khloe owns 18 percent of KLK Clothing that has a total of 139,000 shares of stock
outstanding. Each share receives one vote for each open seat on the board. The next election will
select three new directors. The market price per share is $31. How much does Khloe need to spend,
if any, to guarantee her election to the board if the firm has a cumulative voting policy and no one
else votes for her?
A) $301,661
B) $278,248
C) $660,749
D) $700,648
E) $421,049
86) Denver Machinery has 140,800 shares of stock outstanding, and each share receives one vote
for each open seat on the board of directors. There are five open seats at this time. How many
shares must you control to guarantee your personal election to the board if the firm uses
cumulative voting?
A) 17,001 shares
B) 28,001 shares
C) 28,160 shares
D) 23,468 shares
E) 19,251 shares
