FINA Test 3

If stock prices follow a random walk, which of the following statement(s) is(are) correct?

In the calculation of rates of return on common stock, dividends are _______ and capital gains are ______.

What dividend yield would be reported in the financial press for a stock that currently pays a $1 dividend per quarter and the most recent stock price was $40?

Which of the following values treats the firm as a going concern?

If a stock's P/E ratio is 13.5 at a time when earnings are $3 per year, what is the stock's current price?

How many round lots were traded in a specific stock on a day in which 467,800 shares changed hands?

The book value of a firm's equity is determined by:

What is the current price of a share of stock for a firm with $5 million in balance-sheet equity, 500,000 shares of stock outstanding, and a price/book value ratio of 4?

If the liquidation value of a firm is negative, then:

A firm's liquidation value is the amount:

Which of the following is least likely to account for an excess of market value over book value of equity?

Firms with valuable intangible assets are more likely to show a(n):

Which of the following is inconsistent with a firm that sells for very near book value?

The main purpose of a market-value balance sheet is to:

A stock paying $5 in annual dividends sells now for $80 and has an expected return of 14%. What might investors expect to pay for the stock one year from now?

Which of the following statements is correct about a stock currently selling for $50 per share that has a 16% expected return and a 10% expected capital appreciation?

The expected return on a common stock is composed of:

Firms having a higher expected return have a higher:

How much should you pay for a share of stock that offers a constant growth rate of 10%, requires a 16% rate of return, and is expected to sell for $50 one year from now?

According to the dividend discount model, the current value of a stock is equal to the:

How is it possible to ignore cash dividends that occur far into the future when using a dividend discount model? Those dividends:

If the dividend yield for year one is expected to be 5% based on the current price of $25, what will the year four dividend be if dividends grow at a constant 6%?

What is the expected dividend to be paid in three years if yesterday's dividend was $6.00, dividends are expected to grow at a constant 6% annual rate, and the firm has a 10% expected return?

The value of common stock will likely decrease if:

When valuing stock with the dividend discount model, the present value of future dividends will:

Common stock can be valued using the perpetuity valuation formula if the:

What should be the price for a common stock paying $3.50 annually in dividends if the growth rate is zero and the discount rate is 8%?

Dividing a stock's earnings per share by the expected rate of return will value the share correctly if no new shares are issued and the dividend yield:

If next year's dividend is forecast to be $5.00, the constant growth rate is 4%, and the discount rate is 16%, then the current stock price should be:

What price would you expect to pay for a stock with 13% required rate of return, 4% rate of dividend growth, and an annual dividend of $2.50 which will be paid tomorrow?

What constant growth rate in dividends is expected for a stock valued at $32.00 if next year's dividend is forecast at $2.00 and the appropriate discount rate is 13%?

The g in the constant-growth dividend model refers to:

What rate of return is expected from a stock that sells for $30 per share, pays $1.50 annually in dividends, and is expected to sell for $33 per share in one year?

ABC common stock is expected to have extraordinary growth of 20% per year for two years, at which time the growth rate will settle into a constant 6%. If the discount rate is 15% and the most recent dividend was $2.50, what should be the current share price?

A payout ratio of 35% for a company indicates that:

What would be the expected price of a stock when dividends are expected to grow at a 25% rate for three years, then grow at a constant rate of 5%, if the stock's required return is 13% and next year's dividend will be $4.00?

A company with a return on equity of 15% and a plowback ratio of 60% would expect a constant growth rate of:

What is the plowback ratio for a firm that has earnings per share of $12.00 and pays out $4.00 per share as dividends?

What is the return on equity for a firm that has a constant dividend growth rate of 7% and a dividend payout ratio of 60%?

A positive value for PVGO suggests that the firm has:

Which of the following situations accurately describes a growth stock, assuming that each firm has a required return of 12%?

Other things equal, a firm's sustainable growth rate could increase as a result of:

In general, if a firm has positive present value of growth opportunities, then its price-earnings ratio:

Assuming all of the following firms have a required return of 14%, which would you expect to have a positive present value of growth opportunities?

Which of the following describes a seasoned offering?

Investors are willing to purchase stocks having high P/E ratios because:

Which of the following is least likely to contribute to going concern value?

What happens to a firm that reinvests its earnings at a rate equal to the firm's required return?

What can be expected to happen when stocks having the same expected risk do not have the same expected return?

Dividends that are expected to be paid far into the future have:

The terminal value of a share of stock:

Which of the following best characterizes the difference between growth stocks and income stocks?

Which of the following is more likely to be responsible for a firm having low PVGO?

What is the most likely value of the PVGO for a stock with current price of $50, expected earnings of $6 per share, and a required return of 20%?

What is the expected, constant growth rate of dividends for a stock with current price of $100, expected dividend payment of $10 per share, and a required return of 16%?

Which of the following is true for a firm having a stock price of $42, and expected dividend of $3, and a sustainable growth rate of 8%?

Which of the following is least assured for firms that plowback a portion of earnings into the firm?

What is the value of the expected dividend per share for a stock that has a required return of 16%, a price of $45, and a constant growth rate of 12%?

What is the required return for a stock that has a 6% constant growth rate, a price of $25, an expected dividend of $2, and a P/E ratio of 10?

What should be the price of a stock that offers a $4 annual dividend with no prospects of growth, and has a required return of 12.5%?

According to the constant dividend growth model, a stock price should equal the:

If The Wall Street Journal lists a stock's dividend as $1, then it is most likely the case that the stock:

Which of the following is a characteristic of a dealer market, rather than auction market, for common stock?

What is the minimum amount that shareholders should expect to receive in the event of a complete corporate liquidation?

What is meant by the term true depreciation?

What should be the stock value one year from today for a stock that currently sells for $35, has a required return of 15%, an expected dividend of $2.80, and a constant dividend growth rate of 7%?

The required return on an equity security is comprised of a:

What should be the current price of a share of stock if a $5 dividend was just paid, the stock has a required return of 20%, and a constant dividend growth rate of 6%?

What should be the current price of a stock if the expected dividend is $5, the stock has a required return of 20%, and a constant dividend growth rate of 6%?

Reinvesting earnings into a firm will not increase the stock price unless:

What proportion of earnings is being plowed back into the firm if the sustainable growth rate is 8% and the firm's ROE is 20%?

How much of a stock's $30 price is reflected in PVGO if it expects to earn $4 per share, has an expected dividend of $2.50, and a required return of 20%?

What is the expected constant growth rate of dividends for a stock currently priced at $50, that just paid a dividend of $4, and has a required return of 18%?

Which of the following should increase the firm's sustainable growth rate?

If the liquidation value of a corporation exceeds the market value of the equity, then the:

In a valuation of a non-constant dividend growth stock, the terminal value represents the:

Stocks that have the same expected risk should:

Security prices are said to follow a "random walk," which means that:

If a stock's price decreased during the past week, what is the most likely prediction about this week's price change?

Research indicates that the correlation coefficient between successive days' stock price changes is:

An analyst who relies upon past cycles of stock pricing to make investment decisions is:

Given the efficiency of our financial markets,

If it proves possible to make abnormal profits based on information regarding past stock prices, then the market:

The study of published financial information on a company in order to make investment decisions is known as:

A fundamental analyst:

If investors can consistently profit from thorough reading of published financial information, then the market can, at best, be characterized as:

If no price change occurs in a stock on the day that it announces its next dividend, it can be assumed that:

When investors are not capable of making superior investment decisions on a continual basis based on past prices, public or private information, the market is said to be:

Which group of investors is capable of earning consistent, superior profits if financial markets are strong-form efficient?

Given that markets are efficient, what is the most logical explanation of the fact that a portfolio manager can outperform the S&P 500 by 5% annually?

When new information becomes available in the market, evidence suggests that:

An example that specifically contradicts strong-form market efficiency in U.S. stock markets is that:

Your broker suggests that you can make consistent, excess profits by purchasing stocks on the 20th of the month and selling them on the last day of the month. If this is true, then:

What stock price reaction would you expect from a firm that unexpectedly raises its dividend permanently and by a substantial amount?

The statement that there are no free lunches on Wall Street suggests that:

Which of the following bond investment strategies should be selected by an investor who wants to maximize return over a three-year investment horizon? Bond A that offers a 10% yield for two years, then rolls the proceeds into a one-year bond, Bond B that offers an 11% yield for three years, or invest in three consecutive one-year bonds?

An investor is faced with the decision of whether to invest in a stock with an expected return of 14% or a stock in the same industry with an expected 20% return. Which of the following seems most likely?

Which of the following situations is most likely to occur today for a stock that went down in price yesterday?

What is the maximum gain after two coin tosses for a person who starts with $1 if the occurrence of a head produces a 50% gain while the occurrence of a tail produces a 50% loss?

According to random-walk theory, what are the odds that a stock will increase in price after having increased on two consecutive days of trading?

If the price of a stock falls on four consecutive days of trading, then stock prices:

If the correlation of prices between two stocks is 0.35, then the price of one stock would be expected to:

Trends of past stock market prices would be considered useful or even essential to a(n):

Technical analysts can provide:

Technical analysts are most likely to be successful in a market that is considered:

A primary goal of fundamental analysis is to:

If stock prices incorporate all publicly available information, then the market is considered to be:

Under which of the following forms of market efficiency would stock prices always reflect fair value?

A company reports significantly higher earnings on a Monday. You purchase the stock on Tuesday and earn superior returns in the absence of other new information. The market appears to be:

With respect to the notion that stock prices follow a random walk, several researchers have concluded that:

With semi-strong form market efficiency:

According to the semi-strong form of market efficiency, when new information becomes available in the market:

Which of the following observations provides evidence against strong-form market efficiency?

The difference between a fundamental analyst and a technical analyst is:

If stock prices follow a random walk:

Technical and fundamental analysts help keep the market efficient by:

Semistrong form efficiency describes a market in which:

LookGood, Inc. has just announced the bad news that its earnings have dropped by 30 percent. In fact, its investors had anticipated even worse results (a decrease of 40 percent). As a result, LookGood's stock price:

BestFirm has a 50-year history of solid growth and ever-increasing profits. It is widely regarded as the leading firm of its industry. Hence, BestFirm's stock:

The rise of the dot.coms in the late 1990s is probably due to: