Chapter 7 Test 1. The common stock of Green Garden Flowers is selling for $24 a share. The company pays a constant annual dividend and has a total return of 3.8 percent. What is the amount of the dividend? a. $0.38 b. $0.76 c. $0.91 d. $1.38 e. $1.54 Answer: _____ 2. The Printing Company stock is selling for $32.60 a share based on a 14 percent rate of return. What is the amount of the next annual dividend if the dividends are increasing by 2.5 percent annually? a. $3.48 b. $3.52 c. $3.57 d. $3.66 e. $3.75 Answer: _____ 3. The common stock of Mid-Towne Movers is selling for $33 a share and has a 9 percent rate of return. The growth rate of the dividends is 1 percent annually. What is the amount of the next annual dividend? a. $2.58 b. $2.61 c. $2.64 d. $2.67 e. $2.70 Answer: _____ 4. Delphin’s Marina is expected to pay an annual dividend of $0.58 next year. The stock is selling for $8.53 a share and has a total return of 12 percent. What is the dividend growth rate? a. 3.82 percent b. 4.03 percent c. 4.28 percent d. 5.20 percent e. 5.49 percent Answer: _____ 5. Klaus Toys just paid its annual dividend of $1.40. The required return is 16 percent and the dividend growth rate is 2 percent. What is the expected value of this stock five years from now? a. $11.04 b. $11.26 c. $11.67 d. $12.41 e. $12.58 Answer: _____ 6. Blackwell Ink is losing significant market share and thus its managers have decided to decrease the firm’s annual dividend. The last annual dividend was $0.90 a share but all future dividends will be decreased by 5 percent annually. What is a share of this stock worth today at a required return of 15 percent? a. $4.07 b. $4.28 c. $4.49 d. $4.72 e. $4.95 Answer: _____ 7. The common stock of Tasty Treats is valued at $10.80 a share. The company increases its dividend by 8 percent annually and expects its next dividend to be $0.20 per share. What is the total rate of return on this stock? a. 8.64 percent b. 9.12 percent c. 9.40 percent d. 9.85 percent e. 10.64 percent Answer: _____ 8. River Rock, Inc. just paid an annual dividend of $2.80. The company has increased its dividend by 2.5 percent a year for the past ten years and expects to continue doing so. What will a share of this stock be worth six years from now if the required return is 16 percent? a. $23.60 b. $24.65 c. $25.08 d. $25.50 e. $26.90 Answer: _____ 9. A stock has a market price of $46.10 and pays a $2.40 annual dividend. What is the dividend yield? a. 4.13 percent b. 4.84 percent c. 5.21 percent d. 5.52 percent e. 5.78 percent Answer: _____ 10. The required return on Mountain Meadow stock is 14 percent and the dividend growth rate is 3.5 percent. The stock is currently selling for $11.80 a share. What is the dividend yield? a. 7.50 percent b. 8.00 percent c. 9.75 percent d. 10.50 percent e. 12.50 percent Answer: _____ 11. The Toy Box pays an annual dividend of $2.40 per share and sells for $46.60 a share based on a market rate of return of 15 percent. What is the capital gains yield? a. 7.35 percent b. 7.78 percent c. 9.23 percent d. 9.85 percent e. 10.11 percent Answer: _____ 12. Western Beef stock is valued at $62.10 a share. The company pays a constant annual dividend of $4.40 per share. What is the total return on this stock? a. 6.62 percent b. 6.81 percent c. 7.09 percent d. 7.49 percent e. 7.82 percent Answer: _____ 13. A preferred stock sells for $48.20 a share and has a market return of 15.65 percent. What is the dividend amount? a. $6.93 b. $6.80 c. $7.25 d. $7.42 e. $7.54 Answer: _____