Chapter 7

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

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

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

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

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

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