compen QUESTIUNT Stocks A and B have the following data. Assuming the stock market is efficient and the stocks are in equilibrium, which of the following statements is CORRECT? [Hint: Think about the components of total return in investing stock under constant growth modell Required return Market price Expected growth A 10% $25 7% B 12% $40 9% These two stocks should have the same price. These two stocks must have the same dividend yield. These two stocks should have the same expected return. These two stocks must have the same expected capital gains yield. These two stocks must have the same expected year-end dividend. Click Save and Submit to save and submit. Click Save All Answers to save all answers, Save All Answe 99 DELL P F3 $ % & * 00 3 4 5 6 7 E R T D F G H. K Question Completion Status: QUESTION 2 The expected retum on Rocket Corporation's stock is 11%. The stock's dividend is expected to grow at a constant rate of 3%, and it currently sells for $44 a share Which of the following statements is CORRECT? (Show your work, no guessing!) The stock's dividend yield is 6%. The stock's dividend yield is 3%. The current dividend per share is $2.50. The stock price is expected to be $49.28 a share one year from now. The stock price is expected to be $45.32 a share one year from now. 4 poil QUESTION 3 Which of the following statements is CORRECT? Assume that the project being considered has normal cash flows, with one outflow followed by a series of inflows Save All Answers Click Save and Submit to save and submit. Click Save All Answers to see all answers. 99 DOLL & $ 4 % 5 3 6 7 8 9 E R T U o P D F G H J K L V B N. M QUESTION 3 Which of the following statements is CORRECT? Assume that the project being considered has normal cash flows, with one outflow followed by a series of inflows. A project's regular IRR is found by compounding the initial cost at the WACC to find the terminal value (TV). then discounting the TV at the WACC. A project's regular IRR is found by compounding the cash inflows at the WACC to find the present value (PV). then discounting the TV to find the IRR. If a project's IRR is smaller than the WACC, then its NPV will be positive. A project's IRR is the discount rate that causes the PV of the inflows to equal the project's cost. If a project's IRR is positive, then its NPV must also be positive. QUESTION 4 1 Click Save and Submit to see and submit. Click Save All Answers to see all answers. Save All Answers o II 994 DELL WIVAL PTISCE 41 5 # $ % A & 00* 4 5 6 7 9 E R. T Y U D F G G H HJK L Question Completion Status: QUESTION 4 Assume that interest rates on 20-year Treasury and corporate bonds with different ratings, all of which are noncallable, are as follows: T-bond = 7.72% AAA = 8.72% A9.64% BBB = 10.18% The differences in rates among these issues were most probably caused primarily by: O Real risk-free rate differences. Tax effects Default risk and liquidity differences. Maturity risk differences. Inflation differences. 4 QUESTION 5 Click Save and Submit to save and submit. Click Save All Answers to save all answers Save All Answer o BI e 99 DOLL Priser Ver F12 % & * 8 3 6 4 7 9 E RT G DF H
