Chapter 7 – Assignment
1.
All
common stockholders have voting rights.
Explain the validity of this statement.
2.
What does
the preemptive right allow shareholders?
3.
What is the formula for valuing a constant
growth stock?
4.
Which has
to be greater in the denominator of the formula in #3?
5.
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.
6.
What is the formula to find the required rate of
return using the CAPM?
7.
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.
8.
Using the
constant growth model, write out the formula that solves the required rate of
return.
9.
Using the formula in #8, what does the
non-growth expression represent?
10.
What is
the formula if zero growth stock is present?
11.
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%?
12.
What is the capital gains yield (formula)?
13.
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%.
14.
What is the formula for the valuation of
preferred stock?
15.
Using the
formula in #14, what is the solution if your dividend is 10 and the required
rate of return is 10%?
16.
Explain
the three forms of the EMH?
