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 firms preferred stock is $15 million, while the market value of the firms 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 Nicks Incorporated: D1=$0.83, D2=$0.87, D3=$0.96, and P3=$27.40. If the required return to hold Nicks stock is 15.1%, what is the price today for Nicks 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 investors 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
