31. Which one of the following statements is
correct?
A. The capital gains yield is the annual rate of change in a stock’s
price.
B. Preferred stocks have constant growth dividends.
C. A constant dividend stock cannot be valued using the dividend growth
model.
D. The dividend growth model can be used to compute the current value of
any stock.
E. An increase in the required return will decrease the capital gains
yield.
32. Supernormal growth is a growth rate that:
A. is both positive and follows a year or more of negative growth.
B. exceeds a firm’s previous year’s rate of growth.
C. is generally constant for an infinite period of time.
D. is unsustainable over the long term.
E. applies to a single, abnormal year.
33. Which one of the following represents the capital
gains yield as used in the dividend growth model?
A. D1
B. D1/P0
C. P0
D. g
E. g/P0
34. Winston Co. has a dividend-paying stock with a
total return for the year of -6.5 percent. Which one of the following must be
true?
A. The dividend must be constant.
B. The stock has a negative capital gains yield.
C. The dividend yield must be zero.
D. The required rate of return for this stock increased over the year.
E. The firm is experiencing supernormal growth.
35. The two-stage dividend growth model evaluates the
current price of a stock based on the assumption a stock will:
A. pay an increasing dividend for a period of time and then cease paying
dividends altogether.
B. increase the dividend amount every other year.
C. pay a constant dividend for the first two quarters of each year and
then increase the dividend the last two quarters of each year.
D. grow at a fixed rate for a period of time after which it will grow at a
different rate indefinitely.
E. pay increasing dividends for a fixed period of time, cease paying
dividends for a period of time, and then commence paying increasing dividends
for an indefinite period of time.
36. Which one of the following sets of dividend
payments best meets the definition of two-stage growth as it applies to the
two-stage dividend growth model?
A. no dividends for 5 years, then increasing dividends forever
B. $1 per share annual dividend for 2 years, then $1.25 annual dividends
forever
C. decreasing dividends for 6 years followed by one final liquidating
dividend payment
D. dividends payments which increase by 2, 3, and 4 percent respectively
for 3 years followed by a constant dividend thereafter
E. dividend payments which increase by 10 percent per year for 5 years
followed by dividends which increase by 3 percent annually thereafter
37. Which one of the following rights is never
directly granted to all shareholders of a publicly-held corporation?
A. electing the board of directors
B. receiving a distribution of company profits
C. voting either for or against a proposed merger or acquisition
D. determining the amount of the dividend to be paid per share
E. having first chance to purchase any new equity shares that may be
offered
38. Jen owns 30 shares of stock in Delta Fashions and
wants to win a seat on the board of directors. The firm has a total of 100
shares of stock outstanding. Each share receives one vote. Presently, the
company is voting to elect three new directors. Which one of the following
statements must be true given this information?
A. Regardless of the voting procedure, Jen does not own enough shares to
gain a seat on the board.
B. If straight voting applies, Jen is assured a seat on the board.
C. If straight voting applies, Jen can control all of the open seats.
D. If cumulative voting applies, Jen is assured one seat on the board.
E. If cumulative voting applies, Jen can control all of the open seats.
39. The Blue Marlin is owned by a group of 5
shareholders who all vote independently and who all want personal control over
the firm. What is the minimum percentage of the outstanding shares one of these
shareholders must own if he or she is to gain personal control over this firm
given that the firm uses straight voting?
A. 17
percent
B. 20 percent plus one vote
C. 25 percent plus one vote
D. 50 percent plus one vote
E. 51 percent
40. Chemical Mines has
5,000 shareholders and is preparing to elect two new board members.
You do not own enough shares to personally control the elections but are
determined to oust the current leadership. Likewise, no other single
shareholder owns sufficient shares to personally control the outcome of the
election. Which one of the following is the most likely outcome of this
situation given that some shareholders are happy with the existing
management?
A. negotiated settlement where each side is granted control over one of
the open seats
B. protracted legal battle over control of the board of directors
C. arbitrated settlement where the arbitrator determines who will be
elected to the board
D. control of the board decided without your influence
E. proxy fight for control
