Expert answer:Financial Management Quiz
Answer & Explanation:11182015.docx
11182015.docx
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QUESTION 1
1. A stock is expected to pay a dividend of $0.9 at the end of the year. The required rate of
return is rs = 15.1%, and the expected constant growth rate is g = 6%. What is the stock’s
current price?
Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the
answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.
1 points
QUESTION 2
1. The common stock of Wetmore Industries is valued at $40.8 a share. The company
increases their dividend by 3 percent annually and expects their next dividend to be $5.9.
What is the required rate of return on this stock? That is, solve for r.
Note: Enter your answer rounded off to two decimal points. Do not enter % in the answer
box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box.
1 points
QUESTION 3
1. ABC’s stock has a required rate of return of 16.7%, and it sells for $39 per share. The
dividend is expected to grow at a constant rate of 4.6% per year. What is the expected
year-end dividend, D1?
Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the
answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.
1 points
QUESTION 4
1. ABC’s last dividend was $2.8. The dividend growth rate is expected to be constant at
23% for 3 years, after which dividends are expected to grow at a rate of 7% forever. If
the firm’s required return (rs) is 16%, what is its current stock price (i.e. solve for Po)?
Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the
answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.
1 points
QUESTION 5
1. ABC Company’s last dividend was $2.3. The dividend growth rate is expected to be
constant at 29% for 2 years, after which dividends are expected to grow at a rate of 6%
forever. The firm’s required return (rs) is 16%. What is its current stock price (i.e. solve
for Po)?
Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the
answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.
1 points
QUESTION 6
1. If D1 = $5.7, g (which is constant) = 2.1%, and P0 = $77.5, what is the required rate of
return on the stock? That is, solve for r.
Note: Enter your answer rounded off to two decimal points. Do not enter % in the answer
box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box.
1 points
QUESTION 7
1. ABC Enterprises’ stock is currently selling for $35.9 per share. The dividend is projected
to increase at a constant rate of 6.6% per year. The required rate of return on the stock is
12%. What is the stock’s expected price 5 years from today (i.e. solve for P5)?
Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the
answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.
1 points
QUESTION 8
1. The common stock of ABC Industries is valued at $26.9 a share. The company increases
their dividend by 6.1 percent annually and expects their next dividend to be $2.9. What is
the required rate of return on this stock? That is, solve for r.
Note: Enter your answer rounded off to two decimal points. Do not enter % in the answer
box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box.
1 points
QUESTION 9
1. ABC just paid a dividend of D0 = $0.8. Analysts expect the company’s dividend to grow
by 32% this year, by 24% in Year 2, and at a constant rate of 6% in Year 3 and
thereafter. The required return on this stock is 9%. What is the best estimate of the
stock’s current market value?
Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the
answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.
1 points
QUESTION 10
1. If D0 = $5.5, g = 3.6%, and P0 = $74.6, what is the required rate of return on the stock?
That is, solve for r.
Note: Enter your answer rounded off to two decimal points. Do not enter % in the answer
box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box.
1 points
QUESTION 11
1. A stock just paid a dividend of D0 = $1. The required rate of return is rs = 13.1%, and the
constant growth rate is g = 4.5%. What is the current stock price?
Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the
answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.
1 points
QUESTION 12
1. ABC Enterprises’ stock is expected to pay a dividend of $1.8 per share. The dividend is
projected to increase at a constant rate of 6.9% per year. The required rate of return on
the stock is 16.2%. What is the stock’s expected price 3 years from today (i.e. solve for
P3)?
Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the
answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.
1 points
QUESTION 13
1. ABC’s last dividend paid was $2.1, its required return is 14%, its growth rate is 3.3%,
and its growth rate is expected to be constant in the future. What is Sorenson’s expected
stock price in 7 years, i.e., what is P7?
Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the
answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.
1 points
QUESTION 14
1. If D1 = $5.62 and P0 = $119.6, what is the dividend yield?
Note: Enter your answer rounded off to two decimal points. Do not enter % in the answer
box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box.
1 points
QUESTION 15
1. ABC is expected to pay a dividend of $4.1 per share at the end of the
year. The stock sells for $118 per share, and its required rate of return is 17.7%. The
dividend is expected to grow at some constant rate, g, forever. What is the growth rate
(i.e. solve for g)?
Note: Enter your answer rounded off to two decimal points. Do not enter % in the answer
box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box.
1 points
QUESTION 16
1. ABC Inc., is expected to pay an annual dividend of $2.9 per share next year. The required
return is 12 percent and the growth rate is 8 percent. What is the expected value of this
stock five years from now?
Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the
answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.
…
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