A) Each stock's expected return should equal its realized return as seen by the marginal investor.
B) Each stock's expected return should equal its required return as seen by the marginal investor.
C) All stocks should have the same expected return as seen by the marginal investor.
D) The expected and required returns on stocks and bonds should be equal.
E) All stocks should have the same realized return during the coming year.
G) A) and E)
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A) Stock X has a higher dividend yield than Stock Y.
B) Stock Y has a higher dividend yield than Stock X.
C) One year from now, Stock X's price is expected to be higher than Stock Y's price.
D) Stock X has the higher expected year-end dividend.
E) Stock Y has a higher capital gains yield.
G) A) and D)
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A) The constant growth model is often appropriate for evaluating start-up companies that do not have a stable history of growth but are expected to reach stable growth within the next few years.
B) If a stock has a required rate of return rs = 12% and its dividend is expected to grow at a constant rate of 5%, this implies that the stock's dividend yield is also 5%.
C) The stock valuation model, P0 = D1/(rs - g) , can be used to value firms whose dividends are expected to decline at a constant rate, i.e., to grow at a negative rate.
D) The price of a stock is the present value of all expected future dividends, discounted at the dividend growth rate.
E) The constant growth model cannot be used for a zero growth stock, where the dividend is expected to remain constant over time.
G) C) and E)
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A) 8.03%
B) 8.24%
C) 8.45%
D) 8.67%
E) 8.89%
G) A) and E)
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A) allows managers to buy additional shares below the current market price.
B) will result in higher dividends per share.
C) is included in every corporate charter.
D) protects the current shareholders against a dilution of their ownership interests.
E) protects bondholders, and thus enables the firm to issue debt with a relatively low interest rate.
G) A) and C)
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A) $18.62
B) $19.08
C) $19.56
D) $20.05
E) $20.55
G) All of the above
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A) The two stocks must have the same dividend per share.
B) If one stock has a higher dividend yield, it must also have a lower dividend growth rate.
C) If one stock has a higher dividend yield, it must also have a higher dividend growth rate.
D) The two stocks must have the same dividend growth rate.
E) The two stocks must have the same dividend yield.
G) A) and B)
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A) $41.59
B) $42.65
C) $43.75
D) $44.87
E) $45.99
G) B) and D)
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A) The stock's dividend yield is 7%.
B) The stock's dividend yield is 8%.
C) The current dividend per share is $4.00.
D) The stock price is expected to be $54 a share one year from now.
E) The stock price is expected to be $57 a share one year from now.
G) C) and D)
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B) False
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A) These two stocks should have the same price.
B) These two stocks must have the same dividend yield.
C) These two stocks should have the same expected return.
D) These two stocks must have the same expected capital gains yield.
E) These two stocks must have the same expected year-end dividend.
G) All of the above
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B) False
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A) Stock A's expected dividend at t = 1 is only half that of Stock B.
B) Stock A has a higher dividend yield than Stock B.
C) Currently the two stocks have the same price, but over time Stock B's price will pass that of A.
D) Since Stock A's growth rate is twice that of Stock B, Stock A's future dividends will always be twice as high as Stock B's.
E) The two stocks should not sell at the same price. If their prices are equal, then a disequilibrium must exist.
G) B) and D)
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A) $17.39
B) $17.84
C) $18.29
D) $18.75
E) $19.22
G) D) and E)
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B) False
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B) False
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A) $41.58
B) $42.64
C) $43.71
D) $44.80
E) $45.92
G) None of the above
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A) $37.52
B) $39.40
C) $41.37
D) $43.44
E) $45.61
G) B) and E)
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A) $37.05
B) $38.16
C) $39.30
D) $40.48
E) $41.70
G) A) and B)
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B) False
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