## Finance Chapter 7 â Assignment Questions

Chapter 7 â Assignment

All common stockholders have voting

rights. Explain the validity of this

statement.

What does the preemptive right allow

shareholders?

What is the formula for valuing

a constant growth stock?

Which has to be greater in the denominator of

the formula in #3?

Using the formula in #3, what the price of the

common stock today if your growth rate is 4%, your required rate of return is

13% and the dividend today is $23.

What is the formula to find the

required rate of return using the CAPM?

Using the formula in #6, find the required

rate of return if your risk free rate is 5%, a Dow Jones current return is 10%,

and your beta is 1.3.

Using the constant growth model, write out the

formula that solves the required rate of return.

Using the formula in #8, what

does the non-growth expression represent?

What is the formula if zero growth stock is

present?Using the formula in #10, what

is the price of common stock today if your dividend is $20, and your required

rate of return is 10%?What is the capital gains yield

(formula)?Sometimes you have supernormal growth and later you have a constant

growth rate. What is the price of common

stock today if have a growth rate of 20% for the next 3 years, and a 6%

constant growth rate afterwards? You

dividend today is $1.00. Your required

rate of return is 10%. What is the formula for the

valuation of preferred stock?

Using the formula in #14, what is the solution

if your dividend is 10 and the required rate of return is 10%?

Explain the three forms of the EMH?

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