Question

1. Park Recreational Vehicles Ltd. shares are currently selling for $37.50 each. You bought 200 shares one year ago at $34 and received dividend payments of $1.50 per share. What was your total dollar capital gain this year?
a. $400
b. $300
c. $700
d. none of the above

2. Park Recreational Vehicles Ltd. shares are currently selling for $37.50 each. You bought 200 shares one year ago at $34 and received dividend payments of $1.50 per share. What was your total dollar return?
a. $700
b. $1,000
c. $300
d. none of the above

3. Limestone Co. just paid a dividend of $1.50 per share and its EPS is $9.00. Its book value per share (BVPS) is $36. Calculate Limestone's sustainable growth rate.
a. 20.83 percent
b. 25 percent
c. 4.17 percent
d. 5.25 percent

4. The sustainable growth is negatively related to
a. Net profit margin.
b. Leverage ratio or equity multiplier.
c. Payout ratio.
d. Retention ratio.

5. Which of the following is not a limitation of the DDM?
a. It cannot be applied to firms without dividend payments.
b. It can only be applied to constant growing firms.
c. It cannot be used to value private firms.
d. It cannot be applied to firms with negative earnings.

6. Which of the following is false regarding the relative valuation approach?
a. The most commonly used one is the P/E ratio approach.
b. The M/B ratio may be used instead of the P/E ratio if the firm has negative earnings.
c. We can use the average P/E ratio of the firm’s industry when appropriate.
d. The leading P/E ratio can be estimated as: (Payout ratio)(1 + g)/(k − g).

7. High P/E ratios tend to indicate that a firm will_______, all things being equal.
a. Grow quickly
b. Grow at the same speed as the average firm
c. Grow slowly
d. Not grow



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  • CreatedFebruary 25, 2015
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