3. Which of the following is the most likely path for a companies dividend growth rates to follow?

a. Nonconstant growth

b. Constant growth

c. Zero growth d. Negative growth

4. You are a stock analyst and based on the risk of a stock, ABC, you require a 10% expected return in order to buy. Most of your fellow analyst agree on the likely cash flow of the company but as a group, they (and therefore the market price of the stock) demand a 15% expected return. You are like to recommend which action in ABC stock

a. Buy

b. Sell

c. Hold

A company shows the following calculations for Shareholder Equity

Preferred stock, $25 par value, 1,000,000 shares issued and outstanding

Common Stock, $1 par value, 15,000,000 shares issued and outstanding

Contributed capital in excess of par value - $10,000,000

Retained earnings ________________ - $25,000,000 Show calculations for 5-6

5. What is Total Shareholder Equity? __________________________________________________________________________

6. What is Book Value per Share (to the nearest penny) _________________________________________________________________________

7. You are the owner of a public company that has a pretty reliable and predictable income. You see an opportunity to expand that will require additional capital. Which of the following financing methods will likely produce the best return for your existing shareholders:

a. Sell more Common Stock

b. Sell more Preferred Stock

c. Sell Long Term bonds

d. Have another IPO

8. You have a technology company and in order to attract employees you need to offer them stock options. If your existing shareholders were worried about dilution of their ownership stake, which of the following actions is most likely to please them?

a. Stock Dividend

b. Stock Repurchase

c. Stock Split

d. Reverse Split

9. You own 200 shares of XYZ. They announce they are having a 1 for 5 reverse split. After that corporate action, you will have how many shares?

a. 1000

b. 500

c. 100

d. 40

10. XYZ has $1.50 dividend. You expect them to be able to grow their dividend 3% a year. Given the risk of the stock you require a 8% rate of return in order to buy the stock. Using the Constant Growth Dividend model, what is the highest price you would pay to buy XYZ. Show work Answer _________________________________________________