Classof1.com, Classof1, Class of 1, Classofone, Class of one, Cof1, Co1, Classofone.com
Classof1 would shut down on 31st october 2014. Thank you for your support.
HomeSolution LibraryFinanceInvestment › Solution ID 9017

This solution has not been downloaded by you.

Download now to rate and review the solution!

Multiple choice questions on portfolio Management.

Views (361890)

  1. Church Inc. is presently enjoying relatively high growth because of a surge in the demand for its new product. Management expects earnings and dividends to grow at a rate of 25% for the next 4 years, after which competition will probably reduce the growth rate in earnings and dividends to zero, i.e., g = 0. The company’s last dividend, D0, was $1.25, its beta is 1.20, the market risk premium is 5.50%, and the risk-free rate is 3.00%. What is the current price of the common stock?
    1. $26.77
    2. $27.89
    3. $29.05
    4. $30.21
    5. $31.42

  2. The Ramirez Company's last dividend was $1.75. Its dividend growth rate is expected to be constant at 25% for 2 years, after which dividends are expected to grow at a rate of 6% forever. Its required return (rs) is 12%. What is the best estimate of the current stock price?
    1. $41.58
    2. $42.64
    3. $43.71
    4. $44.80
    5. $45.92

  3. Ackert Company's last dividend was $1.55. The dividend growth rate is expected to be constant at 1.5% for 2 years, after which dividends are expected to grow at a rate of 8.0% forever. The firm's required return (rs) is 12.0%. What is the best estimate of the current stock price?
    1. $37.05
    2. $38.16
    3. $39.30
    4. $40.48
    5. $41.70

  4. Huang Company's last dividend was $1.25. The dividend growth rate is expected to be constant at 15% for 3 years, after which dividends are expected to grow at a rate of 6% forever. If the firm's required return (rs) is 11%, what is its current stock price?
    1. $30.57
    2. $31.52
    3. $32.49
    4. $33.50
    5. $34.50

  5. Agarwal Technologies was founded 10 years ago. It has been profitable for the last 5 years, but it has needed all of its earnings to support growth and thus has never paid a dividend. Management has indicated that it plans to pay a $0.25 dividend 3 years from today, then to increase it at a relatively rapid rate for 2 years, and then to increase it at a constant rate of 8.00% thereafter. Management's forecast of the future dividend stream, along with the forecasted growth rates, is shown below. Assuming a required return of 11.00%, what is your estimate of the stock's current value?

     

    0

    1

    2

    3

    4

    5

    6

    Growth rate

    NA

    NA

    NA

    NA

    50%

    25%

    8%

    Dividends

    $0.000

    $0.000

    $0.000

    $0.250

    $0.375

    $0.469

    $0.506

    1. $9.94
    2. $10.19
    3. $10.45
    4. $10.72
    5. $10.99

  6. Wall Inc. forecasts that it will have the free cash flows (in millions) shown below. If the weighted average cost of capital is 14% and the free cash flows are expected to continue growing at the same rate after Year 3 as from Year 2 to Year 3, what is the Year 0 value of operations, in millions?

    Year

    1

    2

    3

    Free cash flow

    -$20.00

    $48.00

    $54.00

    1. $2,650.00
    2. $2,789.47
    3. $2,928.95
    4. $3,075.39
    5. $3,229.16

  7. Savickas Petroleum’s stock has a required return of 12%, and the stock sells for $40 per share. The firm just paid a dividend of $1.00, and the dividend is expected to grow by 30% per year for the next 4 years, so D4 = $1.00(1.30)4 = $2.8561. After t = 4, the dividend is expected to grow at a constant rate of X% per year forever. What is the stock’s expected constant growth rate after t = 4, i.e., what is X?
    1. 5.17%
    2. 5.44%
    3. 5.72%
    4. 6.02%
    5. 6.34%



Reviews & Ratings

You can help other students Rate this Solution!
Have you downloaded this solution?
Review it Now.

Students Review

nor

thanks for the answer

Cass

The solution does no good without showing how you got the solution Thanks for nothing

$ 3.99 Original Price: $ 6.99 Solution document is in Pdf format

Buy Now
Classof1.com is a safe, secure and trusted website as certified by Norton Secure (powered by VeriSign)
About Us | Terms of Use | Privacy Policy Copyright © 2002-2014 Classof1. All rights reserved.
Get live-chat assistance at Classof1.com
Get live-chat assistance at Classof1.com