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83) New Products pays no dividend at the present time. Starting in Year 3, the firm will pay a
dividend of $.25 per share for two years. After that, the company plans on paying a constant $.75
a share annual dividend indefinitely. How much should you pay per share to purchase this stock
today at a required return of 13.8 percent?
A) $3.78
B) $3.56
C) $4.37
D) $4.61
E) $4.98
84) Sweatshirts Ltd. is downsizing. The company paid an annual dividend of $4.20 last year and
has announced plans to lower the dividend by 25 percent each year. Once the dividend amount
becomes zero, the company will go out of business. You have a required rate of return of 18
percent on this particular stock. What are your shares in this firm worth today on a per share
basis?
A) $7.33
B) $0
C) $8.68
D) $8.29
E) $7.11
85) DT Motors paid its first annual dividend yesterday in the amount of $.15 a share. The
company plans to double the dividend in each of the next 3 years. Starting in Year 4, the firm
plans to pay $1.50 a share indefinitely. What is one share of this stock worth today if the market
rate of return on similar securities is 13.8 percent?
A) $11.02
B) $10.77
C) $8.92
D) $10.26
E) $11.79
86) Sew 'N More just paid an annual dividend of $1.42 a share. The firm plans to pay annual
dividends of $1.45, $1.50, and $1.53 over the next 3 years, respectively. After that time, the
dividends will be held constant at $1.60 per share. What is this stock worth today at a discount
rate of 11.7 percent?
A) $12.39
B) $13.30
C) $13.67
D) $12.79
E) $13.41
87) Home Parties is paying an annual dividend of $1.78 every other year. The last dividend was
paid last year. The firm will continue this policy until two more dividend payments have been
paid. Three years after the last normal dividend payment, the company plans to pay a final
liquidating dividend of $32 per share. What is the current market value of this stock if the
required return is 14.7 percent?
A) $18.92
B) $16.78
C) $14.63
D) $17.14
E) $19.25
88) Next year, Jensen's will pay an annual dividend of $3.32 per share. The company has been
reducing its dividends by 7 percent annually. What is this stock worth today if the required return
is 15.5 percent?
A) $16.92
B) $25.87
C) $14.76
D) $38.33
E) $39.06
89) Kay's Sewing Loft is going to reduce its annual dividend by 10 percent a year for the next
two years. After that, it will maintain a constant dividend of $2 a share. Last year, the company
paid an annual dividend of $3 per share. What is the market value of this stock if the required
return is 13.7 percent?
A) $14.63
B) $15.55
C) $15.08
D) $14.19
E) $15.84
90) Your local toy store just announced its annual dividend will be $4 dividend next year, $3 the
following year, and then a final liquidating dividend of $46 a share in Year 3. At a discount rate
of 18 percent, what should one share sell for today?
A) $36.21
B) $31.48
C) $35.64
D) $39.09
E) $33.54
91) J&J Foods wants to issue 5.4 percent preferred stock with a stated liquidating value of $100 a
share. The company has determined that stocks with similar characteristics provide a return of
8.2 percent. What should the offer price be?
A) $67.26
B) $61.38
C) $64.20
D) $65.85
E) $64.60
92) A preferred stock pays an annual dividend of $5.40 and sells for $63.20 a share. What is the
rate of return?
A) 9.38 percent
B) 9.03 percent
C) 8.54 percent
D) 8.72 percent
E) 8.84 percent
93) A preferred stock sells for $63.60 a share and provides a return of 8.40 percent. What is the
amount of the dividend per share?
A) $5.45
B) $5.25
C) $5.34
D) $5.43
E) $5.28
94) AOK preferred stock pays an annual dividend of $6.50. What is the current price of this
stock at a discount rate of 8.9 percent?
A) $57.85
B) $65.48
C) $78.25
D) $73.03
E) $67.50
95) The Grist Mill just paid its annual dividend of $1.58 per share. The dividends are expected to
grow at 2.7 percent per year, indefinitely. What will the price of this stock be in 7 years if
investors require an annual return of 15.2 percent?
A) $15.08
B) $15.24
C) $15.83
D) $15.64
E) $15.33
96) The next dividend payment by HG Enterprises will be $1.82 per share with future increases
of 2.8 percent annually. The stock currently sells for $38.70 per share. What is the dividend
yield?
A) 4.20 percent
B) 4.70 percent
C) 4.81 percent
D) 4.56 percent
E) 4.41 percent
97) AC Electric just paid its annual dividend of $2.42. The firm plans to increase its dividend by
2.5 percent for the next 3 years and then maintain a constant 2 percent rate of dividend growth.
The required return is 12.5 percent. What is the current value per share of this stock?
A) $32.95
B) $23.09
C) $22.22
D) $28.47
E) $23.82
98) JL Co. stock currently sells for $64 per share and the required return is 12 percent. The total
return is evenly divided between the capital gains yield and the dividend yield. What is the
current dividend per share if it's the company's policy to always maintain a constant growth rate
in its dividends?
A) $4.09
B) $3.62
C) $4.02
D) $3.56
E) $3.84
99) Whistle Stop pays a constant annual dividend of $4 on its stock. The company will maintain
this dividend for the next 3 years and will then cease paying dividends forever. What is the
current price per share if the required return on this stock is 15.6 percent?
A) $10.38
B) $9.52
C) $9.04
D) $9.28
E) $10.02
100) Morris Companies preferred stock pays a constant $5.75 dividend every year. What is the
required return if the stock price is $54.09 per share?
A) 10.63 percent
B) 11.02 percent
C) 11.08 percent
D) 11.84 percent
E) 10.95 percent
101) Hi-Tek is a young start-up company that is currently retaining all of its earnings. The
company plans to pay a $2 per share dividend in Year 7 and increase that dividend by 2.2
percent per year thereafter. What is the current share price if the required return is 16 percent?
A) $5.95
B) $6.62
C) $8.59
D) $14.29
E) $11.78
102) Galloway, Inc., just paid a dividend of $3 per share and has announced that it will increase
its dividend by $1 per share for each of the next 4 years, and then never pay another dividend.
What is the current per share value at a required return of 12.7 percent?
A) $20.08
B) $21.15
C) $16.02
D) $18.60
E) $17.33
103) K's Fashions is growing quickly. Dividends are expected to increase by 8 percent annually
for the next three years, with the growth rate falling off to a constant 3 percent thereafter. The
required return is 14 percent and the company just paid its annual dividend of $3.64 per share.
What is the current share price?
A) $48.96
B) $51.11
C) $38.79
D) $41.87
E) $55.70
104) Timber Co. just paid its annual dividend of $3.82 and expects to reduce this payout by 6
percent each year, indefinitely. What is the per share value of this stock if you require a return of
14.5 percent?
A) $34.79
B) $17.52
C) $18.27
D) $42.24
E) $39.15
105) Farm Machinery stock currently sells for $54.80 per share. The market required return is
14.2 percent while the company maintains a constant 3 percent growth rate in dividends. What
was the most recent annual dividend per share paid on this stock?
A) $6.14
B) $5.96
C) $6.08
D) $5.99
E) $5.87
106) Electric Utilities preferred stock will pay an annual dividend of $12 per share in perpetuity
beginning 8 years from now. What is one share of this stock worth today if the market requires a
return of 9.5 percent?
A) $66.92
B) $64.16
C) $69.08
D) $61.11
E) $63.09
107) Farmco just paid its annual dividend of $.32 per share. The dividends are expected to grow
at 25 percent annually for the next 4 years and then level off to an annual growth rate of 3
percent indefinitely. What is the price of this stock today given a required return of 15 percent?
A) $7.54
B) $7.32
C) $6.03
D) $5.42
E) $9.01
108) HCC, Inc., expects its dividends to grow at 25 percent per year for the next seven years
before levelling off to a constant 3 percent growth rate. The required return is 11 percent. What
is the current stock price if the annual dividend per share that was just paid was $1.05?
A) $43.21
B) $44.36
C) $38.93
D) $32.11
E) $39.96
109) Shore Hotels just paid an annual dividend of $1.50 per share. The company will increase its
dividend by 7 percent next year and will then reduce its dividend growth rate by 2 percentage
points per year until it reaches the industry average of 3 percent dividend growth, after which the
company will keep a constant growth rate forever. What is the price of this stock today given a
required return of 14 percent?
A) $14.85
B) $18.99
C) $11.83
D) $16.54
E) $13.02
110) Currently, a firm has an EPS of $2.08 and a benchmark PE of 12.7. Earnings are expected
to grow by 3.8 percent annually. What is the estimated current stock price?
A) $27.42
B) $27.09
C) $26.08
D) $26.42
E) $28.13
111) A firm has a current EPS of $1.63 and a benchmark PE of 11.7. Earnings are expected to
grow 2.6 percent annually. What is the target stock price in one year?
A) $19.57
B) $22.89
C) $19.07
D) $20.14
E) $21.08
112) Currently, a firm has a benchmark PE of 11.7 and an EPS of $3.20. Earnings are expected
to grow 3.2 percent annually. What is the implicit rate of return?
A) 3.20 percent
B) 2.89 percent
C) 4.08 percent
D) 3.67 percent
E) 4.23 percent
113) Jensen Shipping currently has an EPS of $2.31, a benchmark PE of 13.5, and an earnings
growth rate of 2.3 percent. What is the target share price 4 years from now?
A) $27.32
B) $31.15
C) $38.47
D) $34.15
E) $29.42
114) Raul wants to join the directors of World Trade but currently owns no shares in the
company. He knows that no one else will help elect him. Assume there are 46,000 shares
outstanding at a market price of $12.80 a share. What is the minimum amount Raul must spend
to acquire a seat on the board of directors if there are three open seats and straight voting
applies?
A) $147,212.80
B) $196,266.67
C) $294,412.80
D) $147,200.00
E) $294,400.00
115) Jensen Shipping has 38,400 shares outstanding and uses cumulative voting. The firm grants
one vote for each share of common stock. What is the minimum number of votes required to
obtain a seat on the board of directors if there are three open seats?
A) 12,800
B) 9,600
C) 12,801
D) 9,601
E) 19,201
116) Russell United has 28,500 shares of stock outstanding and has two open seats on its board
of directors. Each share of common stock is granted one vote. How many additional votes are
required to guarantee a seat on the board if the company were to use straight voting rather than
cumulative voting?
A) 0
B) 4,750
C) 4,749
D) 4,751
E) 950
117) Nu-Tek has preferred stock outstanding that pays a cumulative $1.50 dividend per quarter.
This company has not paid any of its dividends for the past two quarters. How much must be
paid as a dividend for each share of preferred stock if the company plans to pay a dividend to its
common shareholders this upcoming quarter?
A) $0
B) $4.50
C) $1.50
D) $6.00
E) $3.00
