91. Last year, Hansen Delivery paid an annual dividend

of $3.20 per share. The company has been reducing the dividends by 10 percent

annually. How much are you willing to pay to purchase stock in this company if

your required rate of return is 11.5 percent?

A. $1.92

B. $7.87

C. $13.40

D. $21.16

E. $24.08

92. Beatrice Markets is expecting a period of intense

growth and has decided to retain more of its earnings to help finance that

growth. As a result, it is going to reduce its annual dividend by 30 percent a

year for the next 2 years. After that, it will maintain a constant dividend of

$2.50 a share. Last year, the company paid $3.60 as the annual dividend per

share. What is the market value of this stock if the required rate of return is

14.5 percent?

A. $14.63

B. $16.70

C. $18.08

D. $19.61

E. $21.23

93. Bonnie’s Ice Cream is expecting its ice cream

sales to decline due to the increased interest in healthy eating. Thus, the

company has announced that it will be reducing its annual dividend by 2 percent

a year for the next five years. After that, it will maintain a constant dividend

of $2 a share. Last year, the company paid $2.20 per share. What is this stock

worth to you if you require a 9.5 percent rate of return?

A. $16.21

B. $17.48

C. $18.64

D. $19.09

E. $21.36

94. J&J Foods wants to issue some 7 percent

preferred stock that has a stated liquidating value of $100 a share. The

company has determined that stocks with similar characteristics provide a 12.8

percent rate of return. What should the offer price be?

A. $37.26

B. $41.38

C. $48.20

D. $54.69

E. $62.60

95. The preferred stock of Rail Lines, Inc., pays an

annual dividend of $7.50 and sells for $59.70 a share. What is the rate of

return on this security?

A. 10.38 percent

B. 11.63 percent

C. 12.56 percent

D. 12.72 percent

E. 12.84 percent

96. Marie owns shares of Deltona Productions preferred

stock which she says provides her with a constant 14.3 percent rate of return.

The stock is currently priced at $45.45 a share. What is the amount of the

dividend per share?

A. $6.00

B. $6.25

C. $6.50

D. $6.60

E. $7.00

97. Zylo, Inc. preferred stock pays a $7.50 annual

dividend. What is the maximum price you are willing to pay for one share of

this stock today if your required return is 9.75 percent?

A. $32.26

B. $35.48

C. $72.68

D. $76.92

E. $79.81

**Essay Questions**

98. What are the primary differences and similarities

between NASDAQ and the NYSE?

99. Using the dividend growth model, explain why a

firm would be hesitant to reduce the growth rate of its dividends.

100. Kelley wants to purchase shares in Classic Kars,

Inc., but is torn between buying shares of common stock or shares of preferred

stock. What should he consider before determining the type of share he should

purchase?