Finance Chapter 7 – Assignment Questions

Chapter 7 – 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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