1. Which of the following best characterizes the difference between growth stocks and income stocks?
A. Growth stocks do not pay dividends.
B. Income stocks offer higher rates of return.
C. Income stocks are seasoned issues.
D. Growth stocks have greater PVGO.
2. A positive value for PVGO suggests that the firm has:
A. a positive return on equity.
B. a positive plowback ratio.
C. investment opportunities with superior returns.
D. a high rate of constant growth.
3. If The Wall Street Journal lists a stock's dividend as $1, then it is most likely the case that the stock:
A. pays $1 quarterly, or an estimated $4 annually.
B. pays $0.25 quarterly, or an estimated $1 annually.
C. paid $1 during the past quarter, with no future dividends forecast.
D. paid $1 during the past year, with no future dividends forecast.
4. How is it possible to ignore cash dividends that occur far into the future when using a dividend discount model? Those dividends:
A. will be paid to a different investor.
B. will not be paid by the firm.
C. have an insignificant present value.
D. ignore the tax consequences of future dividends.
5. The expected return on a common stock is composed of:
A. dividend yield.
B. capital appreciation.
C. both dividend yield and capital appreciation.
D. capital appreciation minus the dividend yield.