A) If the market is in equilibrium, and if Stock Y has the lower expected dividend yield, then it must have the higher expected growth rate.
B) If Stock Y and Stock X have the same dividend yield, then Stock Y must have a lower expected capital gains yield than Stock X.
C) If Stock X and Stock Y have the same current dividend and the same expected dividend growth rate, then Stock Y must sell for a higher price.
D) The stocks must sell for the same price.
E) Stock Y must have a higher dividend yield than Stock X.
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A) The dividend yield on a constant growth stock must equal its expected total return minus its expected capital gains yield.
B) Assume that the required return on a given stock is 13%.If the stock's dividend is growing at a constant rate of 5%, its expected dividend yield is 5% as well.
C) A stock's dividend yield can never exceed its expected growth rate.
D) A required condition for one to use the constant growth model is that the stock's expected growth rate exceeds its required rate of return.
E) Other things held constant, the higher a company's beta coefficient, the lower its required rate of return.
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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.
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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.
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A) $16.28
B) $16.70
C) $17.13
D) $17.57
E) $18.01
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A) 8.37%
B) 8.59%
C) 8.81%
D) 9.03%
E) 9.27%
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A) Preferred stockholders have a priority over bondholders in the event of bankruptcy to the income, but not to the proceeds in a liquidation.
B) The preferred stock of a given firm is generally less risky to investors than the same firm's common stock.
C) Corporations cannot buy the preferred stocks of other corporations.
D) Preferred dividends are not generally cumulative.
E) A big advantage of preferred stock is that dividends on preferred stocks are tax deductible by the issuing corporation.
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A) $104.27
B) $106.95
C) $109.69
D) $112.50
E) $115.38
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A) $17.39
B) $17.84
C) $18.29
D) $18.75
E) $19.22
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