101. Explain why small shareholders should prefer cumulative

voting over straight voting.

102. Ted, a wealthy individual, plans to purchase 30

percent of a firm’s Class A shares of outstanding stock. He believes that such

a purchase will allow him to control the firm by electing his candidates to the

board over time as current board member’s terms expire. The firm has a

cumulative voting process. What factors should Ted be considering and why to

ensure he can gain the control he desires?

103. Explain the primary change that occurred in the

structure of the NYSE in 2006 and how that change affected the exchange

members.

**Multiple Choice Questions**

104. Jefferson Mills just paid a dividend of $1.56 per

share on its stock. The dividends are expected to grow at a constant rate of 8

percent per year, indefinitely. What will the price of this stock be in 7 years

if investors require a 15 percent rate of return?

A. $28.18

B. $32.04

C. $37.46

D. $41.25

E. $43.33

105. The next dividend payment by Hillside Markets

will be $2.35 per share. The dividends are anticipated to maintain a 4.5

percent growth rate forever. The stock currently sells for $70 per share. What

is the dividend yield?

A. 3.20 percent

B. 3.36 percent

C. 3.54 percent

D. 4.50 percent

E. 4.81 percent

106. The Stiller Corporation will pay a $3.80 per

share dividend next year. The company pledges to increase its dividend by 2.4

percent indefinitely. How much are you willing to pay to purchase this

company’s stock today if you require a 6.9 percent return on your investment?

A. $55.07

B. $63.09

C. $72.22

D. $78.47

E. $84.44

107. Suppose you know a company’s stock currently

sells for $90 per share and the required return on the stock is 10 percent. You

also know that the total return on the stock is evenly divided between a

capital gains yield and a dividend yield. What is the current dividend if it’s

the company’s policy to always maintain a constant growth rate in its

dividends?

A. $4.18

B. $4.29

C. $4.37

D. $4.50

E. $4.64

108. Whistle Stop Trains pays a constant $16 dividend

on its stock. The company will maintain this dividend for the next 14 years and

will then cease paying dividends forever. What is the current price per share

if the required return on this stock is 15 percent?

A. $77.78

B. $82.48

C. $91.59

D. $106.67

E. $112.00

109. Morristown Industries has an issue of preferred

stock outstanding that pays a $13.25 dividend every year in perpetuity. What is

the required return if this issue currently sells for $80 per share?

A. 16.56 percent

B. 16.72 percent

C. 16.80 percent

D. 16.86 percent

E. 16.95 percent

110. The Farmer’s Market just paid an annual dividend

of $5 on its stock. The growth rate in dividends is expected to be a constant 5

percent per year indefinitely. Investors require a 13 percent return on the

stock for the first 3 years, a 9 percent return for the next 3 years, a 7

percent return thereafter. What is the current price per share?

A. $212.40

B. $220.54

C. $223.09

D. $226.84

E. $227.50