Problem 1. ________ is hired by a firm to find prospective buyers for its new stock or bond issue.
1. An investment banker
2. A securities analyst
3. A trust officer
4. A commercial loan officer
Problem 2. The ________ is utilized to value preferred stock.
1. variable growth model
2. Gordon model
3. constant growth model
4. zero-growth model
Problem 3. Treasury stock results from the
1. firm selling stock for greater than its par value.
2. authorization of additional shares of stock by the board of directors.
3. repurchase of outstanding stock.
4. cumulative feature on preferred stock.
Problem 4. A firm has the balance sheet accounts, common stock, and paid-in capital in excess of par, with values of $40,000 and $500,000, respectively. The firm has 40,000 common shares outstanding. If the firm had a par value of $1, the stock originally sold for
1. $12.50/share.
2. $13.50/share.
3. $11.50/share.
4. $15.50/share.
Problem 5. Nico Corporation's common stock currently sells for $160 per share. Nico just paid a dividend of $10.18 and dividends are expected to grow at a constant rate of 6 percent forever. If the required rate of return is 12 percent, what will Nico Corporation's stock sell for one year from now?
1. $193.80
2. $179.83
3. $187.04
4. $155.45
Problem 6. A common stock currently has a beta of 1.3, the risk-free rate is an annual rate of 6 percent, and the market return is an annual rate of 12 percent. The stock is expected to generate a constant dividend of $5.20 per share. A toxic spill results in a lawsuit and potential fines, and the beta of the stock jumps to 1.6. The new equilibrium price of the stock
1. cannot be determined from the information given.
2. will be $37.68.
3. will be $33.33.
4. will be $43.33.
Problem 7. Jack wants to determine if Tangshan Inc. stock is fairly valued at $110.00 per share. The firm's dividends are expected to grow at 5 percent indefinitely. Assuming Tangshan China's most recent dividend was $5.50, and the required return on the stock was 14 percent, what is the value of Tangshan's stock?
1. $64.17
2. $46.71
3. $18.75
4. $110.00
Problem 8. Emmy Lou, Inc. has an expected dividend next year of $5.60 per share, a growth rate of dividends of 10 percent, and a required return of 20 percent. The value of a share of Emmy Lou, Inc.'s common stock is ________.
1. $28.00
2. $56.00
3. $22.40
4. $18.67
Problem 9. A firm has an issue of preferred stock outstanding that has a stated annual dividend of $4. The required return on the preferred stock has been estimated to be 16 percent. The value of the preferred stock is ________.
1. $50
2. $64
3. $25
4. $16