31. A preferred stock will pay a dividend of $7.50 in the upcoming year, and every year thereafter, ie., dividends are not expected to grow. You require a return of 10% on this stock. Use the constant growth DDM to calculate the intrinsic value of this preferred stock. A. $0.75 B. $7.50 C. $64.12 D. $56.25 E, None of these is correct. 32. A preferred stock will pay a dividend of $6.00 in the upcoming year, and every year thereafter, ie., dividends are not expected to grow. You require a return of 10% on this stock. Use the constant growth DDM to calculate the intrinsic value of this preferred stock. A.$0.60 B. $6.00 C.$600 D. $60.00 E. None of these is correct. 33. You are considering acquiring a common stock that you would like to hold for one year. ‘You expect to receive both $1.25 in dividends and $32 from the sale of the stock at the end of the year. The maximum price you would pay for the stock today is__if' you wanted to eam a 10% return, A. $30.23 B.S24.11 C.$26.52 D.$27.50 E. None of these is correct. 34, You are considering acquiring a common stock that you would like to hold for one year, ‘You expect to receive both $0.75 in dividends and $16 from the sale of the stock at the end of the year. The maximum price you would pay for the stock today is__if you wanted to earn a 12% return. A.SBI91 B.S14.96 C.$26.52 D.$27.50 E. None of these is correct. 35. You are considering acquiring a common stock that you would like to hold for one year. ‘You expect to receive both $2.50 in dividends and $28 from the sale of the stock atthe end of the year. The maximum price you would pay for the stock today is__if you wanted to eam a 15% return. A. $23.91 B.S24.11 C.$26.82 D.$27.50 E. None of these is correct.36. You are considering acquiring a common stock that you would like to hold for one year. ‘You expect to receive both $3.50 in dividends and $42 from the sale of the stock at the end of the year. The maximum price you would pay for the stock today is ‘you wanted to ear a 10% return, A.$23.91 B.S24.11 C. $26.52 D.$27.50 E, None of these is correct. Paper Express Company has a balance sheet which lists $85 million in assets, $40 million in liabilities and $45 million in common shareholders’ equity. It has 1,400,000 common shares outstanding, The replacement cost of the assets is $115 million. The market share price is $90. 37. What is Paper Express's book value per share? A S168 B. $2.60 C.$32.14 D. $60.71 E, None of these is correct. 38. What is Paper Express's market value per share? A S168 B. $2.60 C.$32.14 D. $60.71 E. None of these is correct. 39. One of the problems with attempting to forecast stock market values is that ‘A. there are no variables that seem to predict market return. B. the earnings multiplier approach can only be used at the firm level. C. the level of uncertainty surrounding the forecast will always be quite high. D. dividend payout ratios are highly variable. E, None of these is correct. 40. The most popular approach to forecasting the overall stock market is to use AA. the dividend multiplier. B. the aggregate return on assets. C. the historical ratio of book value to market value, D. the aggregate earnings multiplier. E. Tobin's Q. Sure Tool Company is expected to pay a dividend of $2 in the upcoming year. The risk-free rate of retum is 4% and the expected retumn on the market portfolio is 14%. Analysts expect the price of Sure Tool Company shares to be $22 a year from now. The beta of Sure Tool Company's stock is 1.25. 41. The market's required rate of return on Sure's stock is A. 14.0% B.17.5% C.16.5% ory? D. 15.25% temcztmpignsane Eons of diese is comect) ‘etecacna-cuslaion maga42. What is the intrin A. $20.60 B. $20.00 C.$12.12 D. $22.00 E, None of these is correct. value of Sure's stock today 43. If Sure's intrinsic value is $21.00 today, what must be its growth rate? A.0.0% B. 10% C.4% D.6% E.™% ‘Torque Corporation is expected to pay a dividend of $1.00 in the upcoming year. Dividends are expected to grow at the rate of 6% per year. The risk-free rate of retum is 5% and the expected return on the market portfolio is 13%. The stock of Torque Corporation has a beta of 12, 44. What is the return you should require on Torque’s stock? A.12.0% B.14.6% C. 15.6% D.20% E, None of these is correct. 45. What is the intrinsic value of Torque's stock? A.$14.29 B. $14.60 €.$12.33 D. $11.62 E. None of these is correct. 46. Midwest Airline is expected to pay a dividend of $7 in the coming year. Dividends are expected to grow at the rate of 15% per year. The risk-free rate of return is 6% and the expected return on the market portfolio is 14%. The stock of Midwest Airline has a beta of 3.00. The return you should require on the stock is A.10% B. 18% C.30% D.42% E. None of these is correct. 47. Fools Gold Mining Company is expected to pay a dividend of $8 in the upcoming year. Dividends are expected to decline at the rate of 2% per year. The risk-free rate of return is 6% and the expected return on the market portfolio is 14%, The stock of Fools Gold Mining, ‘Company has a beta of 0.25. The return you should require on the stock is AM% B.4% C.6% D.8% E. None of these is correct.48. High Tech Chip Company is expected to have EPS in the coming year of $2.50. The expected ROE is 12.5%. An appropriate required return on the stock is 11%. Ifthe firm has a plowback ratio of 70%, the growth rate of dividends should be. A. 5.00% B. 6.25% C. 6.60% D.7.50% E.8.75% 49. A company paid a dividend last year of $1.75. The expected ROE for next year is 14.5%, ‘An appropriate required return on the stock is 10%. Ifthe firm has a plowback ratio of 75%, the dividend in the coming year should be A.S1.80 B. $2.12 C.S1.77 D.S$1.94 E. None of these is correct. 50. High Tech Chip Company paid a dividend last year of $2.50. The expected ROE for next year is 12.5%. An appropriate required return on the stock is 11%. Ifthe firm has a plowback Tatio of 60%, the dividend in the coming year should be A.$1.00 B.S2.50 C.$2.69 D.S281 E. None of these is correct. 51. Suppose that the average P/E multiple in the oil industry is 20. Dominion Oil is expected to have an EPS of $3.00 in the coming year. The intrinsic value of Dominion Oil stock should be A.328.12 B. $35.55 CC. $60.00 D.$72.00 E. None of these is correct. 52. Suppose that the average P/E multiple in the oil industry is 22. Exxon is expected to have an EPS of $1.50 in the coming year. The intrinsic value of Exxon stock should be__. A. $33.00 B. $35.55 C. $63.00 D. $72.00 E. None of these is correct. 53. Suppose that the average P/E multiple in the oil industry is 16. Shell Oil is expected to have an EPS of $4.50 in the coming year. The intrinsic value of Shell Oil stock should be A $28.12 B. $35.55 C. $63.00 D.$72.00 E. None of these is correct.54. Suppose that the average P/E multiple in the gas industry is 17. KMP is expected to have ‘an EPS of $5.50 in the coming year. The intrinsic value of KMP stock should be. A. $28.12 B. $93.50 C. $63.00 D.$72.00 E. None of these is correct. 55. An analyst has determined that the intrinsic value of HPQ stock is $20 per share using the capitalized earnings model. If the typical P/E ratio in the computer industry is 25, then it ‘would be reasonable to assume the expected EPS of HPQ in the coming year is $3.63 B.S4.44 C.$0.80 D. $22.50 E. None of these is correct. 56. An analyst has determined that the intrinsic value of Dell stock is $34 per share using the capitalized earnings model. Ifthe typical P/E ratio in the computer industry is 27, then it would be reasonable to assume the expected EPS of Dell in the coming year is A $3.63 B. $4.44 c.$14.40 D.S$1.26 E. None of these is correct. 57. An analyst has determined thatthe intrinsic value of IBM stock is $80 per share using the capitalized earnings model. Ifthe typical P/E ratio in the computer industry is 22, then it would be reasonable to assume the expected EPS of IBM in the coming year is A. $3.64 B. $4.44 C. $14.40 D. $22.50 E. None of these is correct. 58. Old Quartz Gold Mining Company is expected to pay a dividend of $8 in the coming year. Dividends are expected to decline at the rate of 2% per year. The risk-free rate of retum is 6% and the expected return on the market portfolio is 14%. The stock of Old Quartz Gold Mining Company has a beta of -0.25. The intrinsic value of the stock i A. $80.00 B. $133.33 C. $200.00 D. $400.00 E. None of these is correct. 59. Low Fly Airline is expected to pay a dividend of $7 in the coming year. Dividends are expected to grow at the rate of 15% per year. The risk-free rate of return is 6% and the expected retum on the market portfolio is 14%. The stock of Low Fly Airline has a beta of 3.00. The intrinsic value of the stock is A. $46.67 B. $50.00 C. $56.00 D. $62.50 E. None of these is correct.