Question :
Bulldog Industries
An analyst seeks to determine the value of Bulldog : 1325679
Bulldog Industries
An analyst seeks to determine the value of Bulldog Industries. After careful research, the analyst believes that free cash flows for the firm will be $80 million in 2004 and will grow at 10% for 2005 and 2006. The free cash flows will grow at a rate of 5% after 2006.
60.If Bulldog Industries has a weighted average cost of capital of 10%, find the market value of the firm. (assume that we are at January 1, 2004)
a.$2,085.26
b.$1,946.52
c.$1,745.45
d.$1,665.45
61.The market value of Bulldog Industries debt and preferred stock is $934 million. If the firm has a weighted average cost of capital of 10%, find the equity value of the firm’s stock. The firm has 50 million shares of stock outstanding. (assume that we are at January 1, 2004…)
a.$14.63
b.$16.23
c.$17.03
d.$22.63
62.A firm plans on paying a constant dividend of $2 per share into the foreseeable future. If investors seek a 12% return to hold the firm’s stock, what is fair value for the company’s stock?
a.$13.67
b.$15.67
c.$16.67
d.$18.67
63.Which is NOT a feature of common stock?
a.Voting rights
b.Priority over debt holders for liquidation rights
c.Rights to dividends and other distributions
d.Majority voting system
64.After careful research, you find the present value of the free cash flows of a firm to be $100 million. The market value of the firm’s preferred stock is $15 million, while the market value of the firm’s debt is $40 million. If the firm has 2 million shares of stock outstanding, what is the equity value per share?
a.$20.00
b.$22.50
c.$27.50
d.$30.00
65.You estimate the following cash flows for Nick’s Incorporated: D1=$0.83, D2=$0.87, D3=$0.96, and P3=$27.40. If the required return to hold Nick’s stock is 15.1%, what is the price today for Nick’s stock?
a.$18.31
b.$18.85
c.$19.98
d.$20.35
66.What term refers to the number of shares issued by a firm multiplied by the current price of the shares on the secondary market?
a.Financial leverage
b.Market capitalization
c.Additional paid-in capital
d.Liquidation value
67.What is the term applied to several investment banks joining together to bring an IPO to market to limit risk exposure?
a.Selling group
b.Underwriting portfolio
c.Investment bank portfolio
d.Underwriting syndicate
68.What is the largest (trading volume) over-the-counter (OTC) market in the United States?
a.AMEX
b.NYSE
c.Nasdaq
d.Chicago Board of Trade
69.An investor bought a stock this morning for $50, and plans to sell the stock one year from today. The investor believes the stock will pay a $1 dividend during the next year, and that the stock can be sold for $53 in one year. Given the investor’s beliefs, what is the return from investing in this stock for the next year?
a.4%
b.6%
c.8%
d.10%
70.A share of preferred stock pays a $2 annual dividend, but pays the dividend in four equal quarterly installments. Investors seek a 12% annual percentage return on the investment. What price should the preferred stock trade?
a.$4.17
b.$6.67
c.$8.50
d.$16.67
71.Stone Cold Incorporated reported net income of $10 million for 2003. In addition, shareholder equity for the firm was $80 million at the end of 2003. The company was able to pay $3 million out as dividends to the shareholders for 2003. After 2003, excess paid-in-capital was $60 million. Given this information, what is the growth rate available for Stone Cold?
a.3.75%
b.5.00%
c.7.50%
d.8.75%
72.For a stock pricing model, an analyst selects 10% as the sustainable growth rate in dividends for a firm. Given that the firm pays out 40% of net income as dividends each year, what is the return on shareholder equity for this firm?
a.2.50%
b.4.00%
c.10.00%
d.16.67%
73.A stock is expected to pay a dividend of $3.00 in one year. To purchase the stock, investors seek a 15% annual return. If the stock is currently trading at $60, what is the implied constant growth rate in dividends for the future?
a.5%
b.10%
c.15%
d.20%
