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# Fundamentals Of Corporate Finance Study Set 21

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## Quiz 8 : Stock Valuation

Assume the anticipated growth rate in dividends is constant for Fly-By-Nite Airlines. The expected value of the firm's stock at the end of four years (P4) can be calculated using D5/(r - g) and P0 (1 + g)4.
Free
True False

True

The total rate of return earned on a stock is comprised of the dividend yield and the capital gains yield.
Free
True False

True

The dividend growth model assumes that dividends increase at a constant rate forever.
Free
True False

True

According to the constant growth model, the dividend yield is equal to the required return minus the dividend growth rate.
True False
All else constant, a decrease in the dividend amount will increase the dividend yield of a stock.
True False
Payment of dividends is a tax deductible business expense for a corporation.
True False
Dividends on the common stock of Stable Inc. are expected to grow at a constant rate forever. If you are told Stable's most recent dividend paid, its dividend growth rate, and a discount rate, you can only calculate the price now, from the past and into the future.
True False
All else constant, an increase in the dividend amount will increase the dividend yield of a stock.
True False
The total return on a share of stock = dividend yield + capital gains yield.
True False
Dividends on the common stock of Stable Inc. are expected to grow at a constant rate forever. If you are told Stable's most recent dividend paid, its dividend growth rate, and a discount rate, you can only calculate the price into the future.
True False
When the constant dividend growth model holds, g = capital gains yield.
True False
A decrease in the dividend growth rate will increase a stock's market value, all else the same.
True False
An increase in the required return on a stock will decrease its market value, all else the same.
True False
Dividends received by both individuals and corporations are fully taxable.
True False
All else constant, a decrease in the stock price will increase the dividend yield of a stock
True False
Dividends on the common stock of Stable Inc. are expected to grow at a constant rate forever. If you are told Stable's most recent dividend paid, its dividend growth rate, and a discount rate, you can only calculate the price now.
True False