Question 11(1 point)

What is the most you would be willing to pay for a promise to pay you $10 per year forever, beginning next year, if your opportunity cost of capital is a constant 10%?

Question 11 options:

A)

$10

B)

$100

C)

$1,000

D)

$10,000

Question 12(1 point)

The most widely used ratios for rating stocks are listed below.

1. Price/Earnings ratio (PER);
2. Dividend income
3. Return on Equity (ROE)
4. Return on Investments (ROI).

These are the correct variables for rating stocks. True or false?

Question 12 options:

True

False

Question 13(1 point)

Which of the following statements regarding share repurchases is (are) false?

Question 13 options:

A)

Share repurchases increase the value of the equity of the firm

B)

Share repurchases increase the wealth of those shareholders who sell back their shares to the detriment of those who retain their shares

C)

Share repurchases increase the earnings per share of the firm

D)

All of the above statements are false

Question 14(1 point)

On May 23, 2008, the board of directors of Hasbro, Inc. announced that it would pay a dividend of $0.20 a share on August 15, 2008, to shareholders of record as of August 1, 2008. In order to receive this dividend, an investor would have to purchase the stock on or before

Question 14 options:

A)

May 23, 2008

B)

August 1, 2008

C)

August 15, 2008

D)

the cum-dividend date

Question 15(1 point)

Assume the prevailing interest rate is 8% per annum. A 4-year lease agreement requires you to pay $2,000 up front , followed by annual payments of $1,800 a year for the first two years and $1,500 a year in the last year. What would the payment on a 4 -year lease with a constant annual payment, with the first payment due immediately, have to offer for you to be indifferent between the two lease options? Round your answer to the nearest dollar.

Question 15 options:

A)

$1,063

B)

$2,484

C)

$3,568

D)

$1,789

Question 16(1 point)

A firm paid a dividend of $1.68 per share this year and had earnings of $4.25 a share. The market price of its stock is $50.90. What is its dividend payout ratio?

Question 16 options:

A)

3.3%

B)

39.5%

C)

8.3%

D)

25.3%

Question 17(1 point)

The Sentinel Corporation has an issue of preferred stock that pays a dividend of $5.00 a share. If the appropriate cost of capital is 12%, what would you expect the market price of this stock to be? Round you answer to the nearest cent.

Question 17 options:

A)

$60.00

B)

$24.00

C)

$22.41

D)

$41.67

Question 18(1 point)

Blue chips stocks have a long continuous history of paying dividends. True or false?

Question 18 options:

A) True

B) False

Question 19(1 point)

All of the following are used to determine the intrinsic value of a stock, EXCEPT:

Question 19 options:

A)

forecast of future cash flows for the stock

B)

forecast of the stock price

C)

calculation of present value of these cash flows

D)

Market price

Question 20(1 point)

An investor can obtain an EPS forecast by using Internet sources and computer databases. True or false?

Question 20 options:

A) True

B) False