1. Market price is not the same as book value or liquidation value. 2. At each point in time all securities of the same risk are priced to offer the same expected rate of return. 3. If the market is efficient, stock prices should be expected to react only to new information that is released. 4. 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 ? A. 2.5% B. 4.0% C. 10.0% D. 15.0% 5. If the dividend yield for year 1 is expected to be 5% based on the current price of $25, what will the year 4 dividend be if dividends grow at a constant 6% ? A. $1.33 B.$1.49C.$1.58 D. $1.67 6. The value of common stock will likely decrease if: A. the investment horizon decreases. B. the growth rate of dividends increases. C. the discount rate increases. D. dividends are discounted back to the present. 7. Common stock can be valued using the perpetuity valuation formula if the: A. discount rate is expected to remain constant. B. dividends are not expected to grow. C. growth rate in dividends is not constant. D. investor does not intend to sell the stock. 8. 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% ? A. 5.00% B. 6.25% C. 6.75% D. 15.38% 9. A payout ratio of 35% for a company indicates that: A. 35% of dividends are plowed back for growth. B. 65% of dividends are plowed back for growth. C. 65% of earnings are paid out as dividends. D. 35% of earnings are paid out as dividends. 10. 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? A. 25.00% B. 33.33% C. 66.67% D. 75.00% 11. Dividends that are expected to be paid far into the future have: A. great impact on current stock price due to their expected size. B. equal impact on current stock price as near-term dividends. C. lesser impact on current stock price due to discounting. D. no impact on current stock price because they are uncertain. 12. 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 1 year from now? A. $82.20 B. $86.20 C. $87.20 D. $91,20