1. A corporation has a year end 2008 retained earnings balance of $220,000. The firm reported net profits after taxes of $50,000 in 2009 and paid dividends in 2009 of $30,000. The firm's retained earnings balance at year end 2009 is ______.
A. $240,000
B. $250,000
C. $270,000
D. $300,000
2. The board of directors of the National Computer Company has declared a $5.00 common stock dividend and accepted a plan to freeze the dividend at $5 per year indefinitely. What is the value of the National Computer Company's common stock if the required rate of interest is 15 percent?
3. Kingston Kitchen Stuff has recently sold 1,000 shares of $10.75 preferred stock. What is the value of the stock assuming 10 percent required rate of return?
4. The nominal rate of interest is composed of
A) the real rate plus an inflationary expectation.
B) the real rate plus a risk premium.
C) the risk-free rate plus an inflationary expectation.
D) the risk-free rate plus a risk premium.
5. Edward Accounting Services has an outstanding issue of 1,000 shares preferred stock with a $100 par value, an 8 percent annual dividend, and 5,000 shares of common stock outstanding. If the stock is cumulative and the board of directors has passed the preferred dividend for the last two years, how much must preferred stockholders be paid prior to paying dividends to common stockholders?