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98. A stock is expected to pay a $4.00 dividend per share. The growth rate is expected to be 5
percent. If investors demand 10 percent on this stock, what is the expected price of the stock 10
years from now?
99. A stock is expected to pay a $4.00 dividend per share. The growth rate is expected to be -
1 percent. If investors demand 8 percent on this stock, what is the expected price of the stock
three years from now?
100. A stock is expected to pay a $5.00 dividend per share. The growth rate is expected to be -
2 percent. If investors demand 8 percent on this stock, what is the expected price of the stock
five years from now?
101. A firm's stock is selling at $95.00 per share. Its growth rate is 10 percent and investors
demand 15 percent on this stock. What is the firm's expected dividend?
102. A firm's stock is selling at $75.00 per share. Its growth rate is 10 percent and investors
demand 17 percent on this stock. What is the firm's expected dividend?
103. Which of the following statements is incorrect?
104. A stock recently paid a dividend of $3 per share. Its growth rate is expected to be 8
percent. Investors require a 10 percent return. The stock is selling in the market for $140. What is
this stock worth and is the stock undervalued or overvalued?
105. A stock recently paid a dividend of $2.5 per share. Its growth rate is expected to be 8
percent. Investors require a 10 percent return. The stock is selling in the market for $150. What is
this stock worth and is the stock undervalued or overvalued?
106. Laura is considering two investments: Stock A and B. Both stocks have a P/E ratio of 19.
Stock A has an expected growth rate of 5 percent and stock B has an expected growth rate of 13
percent. Which is the better stock and why?
107. Coca-Cola recently paid a $3.00 dividend. Investors expect a 12 percent return on this
stock. What is the difference in price if Coca-Cola is expected to grow at 6 percent versus 8
percent?
108. Coca-Cola recently paid a $3.00 dividend. Investors expect a 12 percent return on this
stock. What is the difference in price if Coca-Cola is expected to grow at 7 percent versus 8
percent?
109. Coca-Cola recently paid a $3.00 dividend. Investors expect a 12 percent return on this
stock. What is the percentage change in price if Coca-Cola is expected to grow at 7 percent
versus 8 percent?
110. Under what conditions would the constant-growth-rate model not be appropriate?
111. What are the differences between common stock and preferred stock?
112. Explain how it is possible for the Dow Jones Industrial Average and the Nasdaq
Composite to move in different directions in one day.
113. Consider two firms with the same P/E ratio. Explain how one could be described as
expensive compared to the other.
114. Explain how important a firm's growth is by creating an example of a growth and no-
growth stock.
115. Explain how the difference in the bid and ask prices might be considered a hidden cost to
the investor.
116. What 10 sectors of the economy are represented in the S&P 500 Index?
117. When might the constant growth model not be used?
118. Explain the characteristics of preferred stock.
119. Explain how stock is valued if the constant growth model cannot be used.
120. Why might the Standard & Poor's 500 Index be a better measure of stock market
performance than the Dow Jones Industrial Average? Why is the DJIA more popular than the S&P
500?
121. Which is higher, the ask quote or the bid quote? Why?
122. When will a limit order be executed?
123. What are the differences between common stock and preferred stock?
124. Describe how to use the variable growth rate technique to value a stock.
125. Explain how investors use the P/E ratio model.
