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
