A stock is expected to pay a dividend of $0.75 at the end of the year. The required rate of return is r s = 10.5%, and the expected constant growth rate is g = 6.4%. What is the stock's current price?
$18.29

A proxy is a document giving one party the authority to act for another party, including the power to vote shares of common stock. Proxies can be important tools relating to control of firms. TRUE

2.

All companies pay dividends. FALSE

If in the opinion of a given investor a stock's expected return exceeds its required return, this suggests that the investor thinks The stock is a good buy

3.

If D 0 = $2.25, g (which is constant) = 3.5%, and P 0 = $50, what is the stock's expected dividend yield for the coming year?
Answer

4.66

Gay Manufacturing is expected to pay a dividend of $1.25 per share at the end of the year (D 1 = $1.25). The stock sells for $32.50 per share, and its required rate of return is 10.5%. The dividend is expected to grow at some constant rate, g, forever. What is the equilibrium expected growth rate?
6.65%

4.

The constant growth DCF model used to evaluate the prices of common stocks is conceptually similar to the model used to find the price of perpetual preferred stock or other perpetuities TRUE

Preferred stock is a hybrid--a sort of cross between a common stock and a bond--in the sense that it pays dividends that normally increase annually like a stock but its payments are contractually guaranteed like interest on a bond.
FALSE

5.

The expected total return on a share of stock refers to the dividend yield less any commissions paid when the stock is purchased and sold. FALSE

Molen Inc. has an outstanding issue of perpetual preferred stock with an annual dividend of $7.50 per share. If the required return on this preferred stock is 6.5%, at what