MULTIPLE CHOICE: Choose the correct answers.

A corporation has consistently issued a $3 dividend over the past ten years. If the required growth over the same period has been 15%, what is the price of the stock?

a. $15 b. $5 c. $20 d. $45

All of the following are true about preferred shares of stock except:

a. they often have cumulative dividends b. preferred dividends are paid before common dividends c. they come with voting rights d. they are viewed as less risky by investors

The majority of bonds require the issuer (payee) to make periodic payments to principle balance, much like a home loan.

a. True OR b. False

Bond holders prefer all of the following except:

a. voting rights b. first claim on assets compared to shareholders c. interest payments d. a return of principle when payments have been made in full

A corporate bond that gives bond holders a chance to turn their debt into shares has a _____ feature.

a. Callable b. Convertible c. zero coupon d. sinking fund

The word that can best describe the relationship between bond prices and bond yields is:

a. reactive b. inverse c. positive d. inflationary

A corporation has a P/E ratio of 25. If the EPS on the stock are $4, what is the fair value of the stock today?

a. $10 b. $100 c. $6.25 d. N/A

A corporation that has issued debt with a callable feature would likely pay the bonds off early when interest rates:

a. Decrease b. Increase c. remain neutral d. not enough information

It is extremely difficult to estimate the revenues and costs associated with large, complex projects that take several years to develop. This is why subjective judgment is often used for such projects along with discounted cash flow analysis.

a. True OR b. False

If an investment project would make use of land which the firm currently owns, the project should be charged with the opportunity cost of the land.

a. True OR b. False