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Q9. If a stock sells for $50 that has an expected annual dividend of $2 and has a sustainable growth rate of 5%, what is the market discount rate for this stock?
A) 7.5%.
B) 9.0%.
C) 10.0%.
Q10. Regarding the estimates required in the constant growth dividend discount model, which of the following statements is most accurate?
A) The model is most influenced by the estimates of "k" and "g."
B) Dividend forecasts are less reliable than estimates of other inputs.
C) The variables "k" and "g" are easy to forecast.
Q11. All else equal, if there is an increase in the required rate of return, a stock’s value as estimated by the constant growth dividend discount model (DDM) will:
A) increase or decrease, depending upon the relationship between ke and ROE.
B) increase.
C) decrease.
Q12. An analyst has gathered the following data for Webco, Inc:
- Retention = 40%
- ROE = 25%
- k = 14%
Using the infinite period, or constant growth, dividend discount model, calculate the price of Webco’s stock assuming that next years earnings will be $4.25.
A) $55.00.
B) $125.00.
C) $63.75.
Q13. Using the constant growth dividend discount model to value a firm whose growth rate is greater than its required return on equity would result in a value that is:
A) finite but unknown.
B) negative.
C) infinite.
Q14. The constant-growth dividend discount model would typically be most appropriate in valuing a stock of a:
A) rapidly growing company.
B) new venture expected to retain all earnings for several years.
C) moderate growth, "mature" company.
Q15. Which of the following statements about the constant growth dividend discount model (DDM) is FALSE?
A) The constant growth DDM is used primarily for stable mature stocks.
B) In the constant growth DDM dividends are assumed to grow at a constant rate forever.
C) For the constant growth DDM to work, the growth rate must exceed the required return on equity.
Q16. A stock is expected to pay a dividend of $1.50 at the end of each of the next three years. At the end of three years the stock price is expected to be $25. The equity discount rate is 16 percent. What is the current stock price?
A) $24.92.
B) $17.18.
C) $19.39.
Q17. Use the following information on Brown Partners, Inc. to compute the current stock price.
- Dividend just paid = $6.10
- Expected dividend growth rate = 4%
- Expected stock price in one year = $60
- Risk-free rate = 3%
- Equity risk premium = 12%
A) $59.55.
B) $57.70.
C) $57.48.
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发表于 2009-3-2 13:50
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