Test bank for Fundamentals of Corporate Finance 10th edition by Stephen Ross

Test bank for Fundamentals of Corporate Finance 10th edition by Stephen Ross

Chapter 08
Stock Valuation

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

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

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

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

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

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

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

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

9. Which one of the following is a type of equity security that has a fixed dividend and a priority status over other equity securities?

A. senior bond

B. debenture

C. warrant

D. common stock

E. preferred stock

10. Callander Enterprises stock is listed on NASDAQ. The firm is planning to issue some new equity shares for sale to the general public. This sale will occur in which one of the following markets?

A. private

B. auction

C. exchange floor

D. secondary

E. primary

11. The secondary market is best defined by which one of the following?

A. market in which subordinated shares are issued and resold

B. market conducted solely by brokers

C. market dominated by dealers

D. market where outstanding shares of stock are resold

E. market where warrants are offered and sold

12. An agent who maintains an inventory from which he or she buys and sells securities is called a:

A. broker.

B. trader.

C. capitalist.

D. principal.

E. dealer.

13. An agent who arranges a transaction between a buyer and a seller of equity securities is called a:

A. broker.

B. floor trader.

C. capitalist.

D. principal.

E. dealer.

14. The owner of one of the 1,366 trading licenses for the NYSE is called a:

A. broker.

B. member.

C. agent.

D. specialist.

E. dealer.

15. The person on the floor of the NYSE who executes buy and sell orders on behalf of customers is called a(n):

A. floor trader.

B. dealer.

C. specialist.

D. executor.

E. commission broker.