Question 1

Cumulative preferred stocks are preferred stocks for which all passed (unpaid) dividends in arrears must be paid along with the current dividend prior to the payment of dividends to common stockholders.

Accepted Answer

A) True 
 B)False

Question 2

In the case of liquidation, bondholders are paid first, followed by preferred stockholders, followed by common stockholders.

Accepted Answer

A) True 
 B)False

Question 3

The attempt by a nonmanagement group to gain control of the management of a firm by soliciting a sufficient number of proxy votes is called a ________.

Accepted Answer

A)   hostile takeover
B)   bankruptcy proceeding
C)   proxy battle
D)   management buyoutE) B) and C)
F) A) and D)

Question 4

China America Manufacturing has a beta of 1.50, the risk-free rate of interest is currently 12 percent, and the required return on the market portfolio is 18 percent. The company plans to pay a dividend of $2.45 per share in the coming year and anticipates that its future dividends will increase at an annual rate consistent with that experienced over the 2001-2003 period.  Estimate the value of China America Manufacturing's stock.

Accepted Answer

ks = 0.12 + 1.50 (0.18 - 0.12)...

Question 5

A firm issued 5,000 shares of $1 par-value common stock, receiving proceeds of $20 per share. The amount recorded for the paid-in capital in excess of par account is ________.

Accepted Answer

A)   $5,000
B)   $95,000
C)   $100,000
D)   $0E) B) and C)
F) B) and D)

Question 6

Which of the following is an attribute of investment bankers?

Accepted Answer

A)   They make long-term investments for banking institutions.
B)   They bear the risk of selling a security issue.
C)   They act as middlemen between the issuer and the banker.
D)   They provide the issuer with advice relating to the amounts of dividend to be paid.E) None of the above
F) B) and D)

Question 7

The use of the ________ is especially helpful in valuing firms that are not publicly traded.

Accepted Answer

A)   liquidation value
B)   book value
C)   P/E multiple
D)   present value of the dividendsE) A) and B)
F) A) and C)

Question 8

Daniel Custom Cycles' common stock currently pays no dividends. The company plans to begin paying dividends beginning 3 years from today. The first dividend will be $3.00 and dividends will grow at 5 percent per year thereafter. Given a required return of 15 percent, what would you pay for the stock today?

Accepted Answer

A)   $25.33
B)   $18.73
C)   $29.86
D)   $22.68E) A) and D)
F) A) and C)

Exam 7: Stock Valuation

A firm issued 5,000 shares of $1 par-value common stock, receiving proceeds of $20 per share. The amount recorded for the paid-in capital in excess of par account is ________.

Correct Answer
verified

Cumulative preferred stocks are preferred stocks for which all passed (unpaid) dividends in arrears must be paid along with the current dividend prior to the payment of dividends to common stockholders.

Correct Answer
verified

The use of the ________ is especially helpful in valuing firms that are not publicly traded.

Correct Answer
verified

In the case of liquidation, bondholders are paid first, followed by preferred stockholders, followed by common stockholders.

Correct Answer
verified

Correct Answer
verified
ks = 0.12 + 1.50 (0.18 - 0.12)...
View Answer

The attempt by a nonmanagement group to gain control of the management of a firm by soliciting a sufficient number of proxy votes is called a ________.

Correct Answer
verified

Correct Answer
verified

Which of the following is an attribute of investment bankers?

Correct Answer
verified

Exam 7: Stock Valuation

A firm issued 5,000 shares of $1 par-value common stock, receiving proceeds of $20 per share. The amount recorded for the paid-in capital in excess of par account is ________.

Correct AnswerverifiedShow Answer

Cumulative preferred stocks are preferred stocks for which all passed (unpaid) dividends in arrears must be paid along with the current dividend prior to the payment of dividends to common stockholders.

Correct AnswerverifiedShow Answer

The use of the ________ is especially helpful in valuing firms that are not publicly traded.

Correct AnswerverifiedShow Answer

In the case of liquidation, bondholders are paid first, followed by preferred stockholders, followed by common stockholders.

Correct AnswerverifiedShow Answer

Correct Answerverifiedks = 0.12 + 1.50 (0.18 - 0.12)...View AnswerShow Answer

The attempt by a nonmanagement group to gain control of the management of a firm by soliciting a sufficient number of proxy votes is called a ________.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following is an attribute of investment bankers?

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
ks = 0.12 + 1.50 (0.18 - 0.12)...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified