Chapter 08 Stock Valuation


Multiple Choice Questions



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Multiple Choice Questions
 

1. What is the model called that determines the present value of a stock based on its next annual dividend, the dividend growth rate, and the applicable discount rate? 


A. zero growth
B. dividend growth
C. capital pricing
D. earnings capitalization
E. discounted dividend

Refer to section 8.1

 


AACSB: N/A
Difficulty: Basic
Learning Objective: 8-1
Section: 8.1
Topic: Dividend growth model
 

2. Which one of the following is computed by dividing next year's annual dividend by the current stock price? 


A. yield to maturity
B. total yield
C. dividend yield
D. capital gains yield
E. growth rate

Refer to section 8.1

 


AACSB: N/A
Difficulty: Basic
Learning Objective: 8-1
Section: 8.1
Topic: Dividend yield
 

3. Which one of following is the rate at which a stock's price is expected to appreciate? 


A. current yield
B. total return
C. dividend yield
D. capital gains yield
E. coupon rate

Refer to section 8.1

 


AACSB: N/A
Difficulty: Basic
Learning Objective: 8-1
Section: 8.1
Topic: Capital gains yield
 

4. Which one of the following types of stock is defined by the fact that it receives no preferential treatment in respect to either dividends or bankruptcy proceedings? 


A. dual class
B. cumulative
C. non-cumulative
D. preferred
E. common

Refer to section 8.2

 


AACSB: N/A
Difficulty: Basic
Learning Objective: 8-1
Section: 8.2
Topic: Common stock
 

5. A company has two open seats, Seat A and Seat B, on its board of directors. There are 6 candidates vying for these 2 positions. There will be a single election to determine the winner of both open seats. As the owner of 100 shares of stock, you will receive one vote per share for each open seat. You decide to cast all 200 of your votes for a single candidate. What is this type of voting called? 


A. democratic
B. cumulative
C. straight
D. deferred
E. proxy

Refer to section 8.2

 


AACSB: N/A
Difficulty: Basic
Learning Objective: 8-2
Section: 8.2
Topic: Cumulative voting
 

6. You want to be on the board of directors of Wisely Foods. Since you are the only shareholder that will vote for you, you will need to own more than half of the outstanding shares of stock if you are to be elected to the board. What is the type of voting called that requires this level of stock ownership to be successfully elected under these conditions? 


A. democratic
B. cumulative
C. straight
D. deferred
E. proxy

Refer to section 8.2

 


AACSB: N/A
Difficulty: Basic
Learning Objective: 8-2
Section: 8.2
Topic: Straight voting
 

7. You cannot attend the shareholder's meeting for Alpha United so you authorize another shareholder to vote on your behalf. What is the granting of this authority called? 


A. altering
B. cumulative voting
C. straight voting
D. indenture agreement
E. voting by proxy

Refer to section 8.2

 


AACSB: N/A
Difficulty: Basic
Learning Objective: 8-2
Section: 8.2
Topic: Proxy
 

8. What are the distributions to shareholders by a corporation called? 


A. retained earnings
B. net income
C. dividends
D. capital payments
E. diluted profits

Refer to section 8.2

 



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