Financial Planning and Forecasting\

6What is the value of a preferred stock that pays a $210 dividend to an investor with a required rate of return of 11%

A$19

B$23

C$17

D$21

ENone of the options specified here

 

17You are considering the purchase of Tamika Williams Company stock You anticipate that the company will pay dividends of $200 per share next year and $225 per share the following year You believe that you can sell the stock for $1750 per share two years from now If your required rate of return is 12 percent, what is the maximum price that you would pay for a share of Tamika Company stock?

A$1750

B$2175

C$1975

D$1753

ENone of the options specified here

 

18Common stockholders have priority over both the preferred stockholders and bond owners in the case of a firm’s bankruptcy

True

False

 

19Which of the following is true about common stockholders?

I Common stockholders have a limited liability

II Common stockholders are residual owners of the company

III Common Stocks holders are entitled to dividend whenever the firm makes a profit

 

AI and III only

BII and III only

CI and II only

DI, II, and III only

ENone of the options specified here

 

20Which of the following is true about a preferred stock?

a Non payment of dividend does not bring bankruptcy

b Pays a fixed rate of dividend each year c Dividends can be deducted from firm’s income for tax purposes

 

Aa and b only

Ba and c only

Cb and c only

Da, b, and c only

ENone of the options specified here

Solution: