Constant Growth Dividend Discount Model And Ordinary Shares Quiz

A company’s dividend grows at a constant rate of 5 percent p.a.. Last week it paid a dividend of $2.93. If the required rate of return is 13 percent p.a., what is the price of the share 2 years from now? (round to nearest cent)
Select one:
a. $42.40
b. $40.38
c. $33.20
d. $49.10
ABC Limited has a stable sales track record but does not expect to grow in the future. Its last annual dividend was $2.23. If the required rate of return on similar investments is 18 percent p.a., what is the current share price? (to the nearest cent; don’t use the $ sign)
Answer:
After paying a dividend of $1.90 last year, a company does not expect to pay a dividend for the next year. After that it plans to pay a dividend of 6.05 in year 2 and then increase the dividend at a rate of 5 percent per annum in years 3 to 6. What is the expected dividend to be paid in year 4? (to nearest cent; don’t include $ sign)
Answer:
Which of the following best describes the constant-growth dividend discount model?
Select one:
A. It is the formula for the present value of a growing annuity
B. It is the formula for the present value of an ordinary annuity.
C. It is the formula for the present value of a finite, uneven cash flow stream
D. It is the formula for the present value of a growing perpetuity
A company has just paid its first dividend of $0.83. Next year’s dividend is forecast to grow by 9 percent, followed by another 9 per cent growth in year two. From year three onwards dividends are expected to grow by 2.2 percent per annum, indefinitely. Investors require a rate of return of 14 percent p.a. for investments of this type. The current price of the share is (round to nearest cent)
Select one:
a. $8.12
b. $7.37
c. $4.07
d. $3.96
Which ONE of the following statements is true about ordinary shares?
Select one:
A. Ordinary Shares are considered to have a fixed maturity.
B. Owners of ordinary shares are guaranteed dividend payment by the company.
C. Owners of ordinary shares have the lowest-priority claim on the company’s assets in the event of insolvency.
D. Ordinary shareholders have unlimited liability.
Equity holders require a higher return than debt holders because
Select one:
A. they are greedy
B. shares have low levels of volatility
C. dividends are uncertain and equity ranks below debt in a liquidation
D. coupon payments are volatile
A company has just paid its annual dividend of $3.47 yesterday, and it is unlikely to change the amount paid out in future years. If the required rate of return is 14 percent p.a., what is the share worth today? (to the nearest cent; don’t include $ sign)
Answer:
A company has its share currently selling at $13.40 and pays dividends annually. The company is expected to grow at a constant rate of 2 percent pa.. If the appropriate discount rate is 19 percent p.a., what is the expected dividend, a year from now (rounded to nearest cent)?
Answer:
Question text
The strong-form version of the efficient market hypothesis states that stock prices reflects ______________ information relevant to the firm.
Select one:
A. all publicly available as well as company inside
B. all publicly available financial and economic
C. all publicly available
D. all private inside

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