1. Sultan Services has 1.2 million shares outstanding. It expects earnings at the end of the year of $5.6 million. Sultan pays out 60% of its earnings in total - 40% paid out as dividends and 20% used to repurchase shares. If Sultan's earnings are expected to grow by 7% per year, these payout rates do not change, and Sultan's equity cost of capital is 9%, what is Sultan's share price?
Question options :A)$22.40 B)$56.00 C)$93.33 D)$140.00
2. A risk-free, zero-coupon bond has 15 years to maturity. Which of the following is closest to the price per $100 of face value that the bond will trade at if the YTM is 7%?
3.Which of the following statements is FALSE?
A) As firms mature, their earnings exceed their investment needs and they begin to pay dividends.
B) Total return equals earnings multiplied by the dividend payout rate.
C) Cutting the firm's dividend to increase investment will raise the stock price if, and only if, the new investments have a positive net present value (NPV).
D) We cannot use the constant dividend growth model to value the stock of a firm with rapid or changing growth.
4. Which of the following statements is FALSE?
A) Estimating dividends, especially for the distant future, is difficult.
B) A firm can only pay out its earnings to investors or reinvest their earnings.
C) Successful young firms often have high initial earnings growth rates.
D) According to the constant dividend growth model, the value of the firm depends on the current dividend level, divided by the equity cost of capital plus the growth rate.