finance data bank

131. In the Gordon model, the value of the common stock is the

A) net value of all assets which are liquidated for their exact accounting value.

B) actual amount each common stockholder would expect to receive if the firm's assets are sold, creditors and preferred stockholders are repaid, and any remaining money is divided among the common stockholders.

C) present value of a non-growing dividend stream.

D) present value of a constant, growing dividend stream.

132. Emmy Lou, Inc. has an expected dividend next year of $5.60 per share, a growth rate of dividends of 10 percent, and a required return of 20 percent. The value of a share of Emmy Lou, Inc.'s common stock is ________.

A) $28.00

B) $56.00

C) $22.40

D) $18.67

133. A firm has experienced a constant annual rate of dividend growth of 9 percent on its common stock and expects the dividend per share in the coming year to be $2.70. The firm can earn 12 percent on similar risk involvements. The value of the firm's common stock is ________.

A) $22.50/share

B) $9/share

C) $90/share

D) $30/share

134. A common stock currently has a beta of 1.3, the risk-free rate is an annual rate of 6 percent, and the market return is an annual rate of 12 percent. The stock is expected to generate a constant dividend of $5.20 per share. A toxic spill results in a lawsuit and potential fines, and the beta of the stock jumps to 1.6. The new equilibrium price of the stock

A) will be $37.68.

B) will be $43.33.

C) will be $33.33.

D) cannot be determined from the information given.

135. Nico Corporation's common stock currently sells for $180 per share. Nico just paid a dividend of $10.18 and dividends are expected to grow at a constant rate of 6 percent forever. If the required rate of return is 12 percent, what will Nico Corporation's stock sell for one year from now?

A) $190.80

B) $187.04

C) $195.40

D) $179.84

136. Tangshan China Company's stock is currently selling for $80.00 per share. The expected dividend one year from now is $4.00 and the required return is 13 percent. What is Tangshan's dividend growth rate assuming that dividends are expected to grow at a constant rate forever?

A) 8%

B) 9%

C) 10%

D) 11%

137. Tangshan China's stock is currently selling for $160.00 per share and the firm's dividends are expected to grow at 5 percent indefinitely. Assuming Tangshan China's most recent dividend was $5.50, what is the required rate of return on Tangshan's stock?

A) 7.3%

B) 8.6%

C) 9.5%

D) 10.6%

138. ________ is the actual amount each common stockholder would expect to receive if the firm's assets are sold, creditors and preferred stockholders are repaid, and any remaining money is divided among the common stockholders.

A) Liquidation value

B) Book value

C) The P/E multiple

D) The present value of the dividends

139. ________ is a guide to the firm's value if it is assumed that investors value the earnings of a given firm in the same way they do the average firm in the industry.

A) Liquidation value

B) Book value

C) The P/E multiple

D) The present value of the dividends

140. Which of the following valuation methods is superior to the others in the list since it considers expected earnings?

A) liquidation value

B) book value

C) P/E multiple

D) present value of the interest

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

A) liquidation value

B) book value

C) P/E multiple

D) present value of the dividends

142. The current price of DEF Corporation stock is $26.50 per share. Earnings next year should be $2 per share and it should pay a $1 dividend. The P/E multiple is 15 times on average. What price would you expect for DEF's stock in the future?

A) $13.50

B) $15.00

C) $26.50

D) $30.00

143. Nico Corporation expects to generate free-cash flows of $200,000 per year for the next five years. Beyond that time, free cash flows are expected to grow at a constant rate of 5 percent per year forever. If the firm's average cost of capital is 15 percent, the market value of the firm's debt is $500,000, and Nico has a half million shares of stock outstanding, what is the value of Nico's stock?

A) $2..43

B) $3.43

C) $1.43

D) $0.00

144. Karina's Caribbean Foods had total assets as recorded on its balance sheet are $1,500,000. What is the value of the Karina's common stock if it has $950,000 in liabilities, and 7,500 shares of common stock outstanding?

145. Scooter World has estimated the market value of its assets to be $1,250,000. What is the value of Scooter Wrold's common stock if it has $900,000 in liabilities, $50,000 in preferred stock, and 7,500 shares of common stock outstanding?

146. Tangshan Antiques has a beta of 1.40, the annual risk-free rate of interest is currently percent, and the required return on the market portfolio is 16 percent. The firm estimates that its future dividends will continue to increase

at an annual compound rate consistent with that experienced over the 2000-2003 period.

(a) Estimate the value of Tangshan Antiques stock.

(b) A lawsuit has been filed against the company by a competitor, and the potential loss has increased risk, which is reflected in the company's beta, increasing it to 1.6. What is the estimated price of the stock following the filing of the lawsuit.

147. The capital budgeting process consists of five distinct but interrelated steps: proposal generation, review and analysis, decision making, implementation, and follow-up.

148. The capital budgeting process consists of four distinct but interrelated steps: proposal generation, review and analysis, decision making, and termination.

149. Independent projects are projects that compete with one another for the firm's resources, so that the acceptance of one eliminates the others from further consideration.

150. A non-conventional cash flow pattern associated with capital investment projects consists of an initial outflow followed by a series of inflows.