Companies with strong earnings but limited growth opportunities A) do not generally pay any dividends. B) are called blue-chip stocks. C) generally pay high dividends. D) are speculative stocks. E) A & B F) C & D
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. Companies with strong earnings but limited growth opportunities
A) do not generally pay any dividends.
B) are called blue-chip stocks.
C) generally pay high dividends.
D) are speculative stocks.
E) A & B
F) C & D
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- Which of the following statements is NOT true? A. Stock owners benefit from stock price increases B. Higher stock prices allow companies access to more capital C. Common stocks are not securities D. Stock prices tend to be very volatileExplain why the following statement is wrong: “The stock price is equal to the value of equity, divided by shares outstanding. Therefore, companies should avoid issuing equity because the number of shares outstanding goes up and thus the stock price would decrease."Common shares are the most important security issued by the companies to raise the funds. Since, return on common securities is not fixed due to which prices of the common shares also fluctuates. Which would be more appropriate for evaluating your company's stock price, a constant or non-constant growth model, and why? How would each of the factors used in these models impact your estimated value.
- Preferred stock may be good for a company because it a. is not as costly as common stock or bonds. b. expands the capital base of the firm without diluting the common stock ownership. c. has no future negative ramifications when dividend payments are missed. d. does not require interest payment in times of financial trouble, but are tax-deductible when dividends are paid.Which of the following is a difference between stocks and bonds? Select one: a. cash flows to bondholders are not known and not promised, cash flows to stockholders are known and promised b. companies issue stocks to grow the company and issue debt to pay bills c. required returns on debt are typically lower than required returns on equity d. dividends are legal obligations of the firm; coupons are not. Clear my choiceWhich of the following statements is true? Group of answer choices a. Dividend payments are attractive to executives who hold many executive stock options that were awarded to them by their firms b.Executives and other insiders benefit most by being able to tender their shares in an open market repurchase since they usually are privy to information that is not available to the general public c.Empirical research suggests that small, retail investors prefer stock repurchases to dividend payments d. a firm does not pay dividends, some institutional investors are prohibited from investing it the firmʹs equity
- A firm is planning to issue bonds to make an equity repurchase to increase its stock price. It is basing its analysis on the fact that there will be fewer shares outstanding after the repurchases, and higher earnings per share. Will the higher earnings per share always translate into a higher stock price? a. No b. Depends on stock price c. Yes d. IndifferentWhich of the following statements is correct? A. The optimal dividend policy is the one that satisfies management, not shareholders. B. The use of debt financing has no effect on earnings per share (EPS) or stock price. C. Stock price is dependent on the projected EPS and the use of debt, but not on the timing of the earnings stream. D. The riskiness of projected EPS can impact the firm's value. E. Dlvidend policy is one aspect of the firm's financial policy that is determined solely by the shareholders. Reset SelectionThe history of the stock market shows that there are a large number of start -up corporations whose stock price traded at high market values despite large losses and never any positive earnings. Why would investors be willing to pay a high price for the stock of a corporation that has never reported positive earnings?
- Consider each of the following statements, state whether you believe they are true orfalse and explain your choice of answer (I) The dividend valuation model can only be used for determining the shareprice if a company is currently paying dividends and those dividends areexpected to grow at a constant rate.(ii) The fact that share prices may be highly volatile does not necessarily meanthat the stock market is inefficient.(iii) Newly listed companies are much more difficult to value using the dividendvaluation model than are companies with a long history of being listed on the stock exchange.(iv) The dividend valuation model only takes account of financial payments to shareholders and as such does not take account of intangible factors such as brand loyalty, goodwill and patents) which are likely to impact on share value.Assumes stock markets are both deep (many buyers and sellers) and liquid (easy to buy or sell). As soon as new information becomes available about a company, the supply and/or demand for its stock are not immediately affected. The first and second statements are both false. The first statement is false. The second statement is true. The first and second statements are both true. The first statement is true. The second statement is false.Which one of the followings is incorrect regarding to cost of equity: On average, it is higher than cost of debt. It moves in the same direction with tax rates. It is affected by return on market portfolio. For a dividend paying company, it is sensitive to growth expectations for future dividends. It is highly dependent on risk level of the firm and growth rate. For calculating cost of equity, we can rely on dividend growth model or SML approach. Both models might suffer from the assumption that past is a good predictor of future. True False Percy's Wholesale Supply has earnings before interest and taxes of €106,000. Both the book and the market value of debt is €170,000. The unlevered cost of equity is 15.5 per cent while the pre-tax cost of debt is 8.6 per cent. The tax rate is 28 per cent. What is the firm's weighted average cost of capital? Show your steps.
