1.What is the name given to the model that computes the present value of a stock by dividing next years annual dividend amount by the difference between the discount rate and the rate of change in the annual dividend amount?A.Stock pricing modelB.Equity pricing modelC.Capital gain modelD.Dividend growth modelE.Present value modelRefer to section 7.1.Blooms: KnowledgeDifficulty: BasicLearning Objective: 07-01 Assess how stock prices depend on future dividends and dividend growth.Section: 7.1Topic: Dividend growth model2.The dividend yield is defined as:A.the current annual cash dividend divided by the current market price per share.B.the current annual cash dividend divided by the current book value per share.C.next years expected cash dividend divided by the current market price per share.D.next years expected cash dividend divided by the current book value per share.E.next years expected cash dividend divided by next years expected market price per share.Refer to section 7.1.Blooms: KnowledgeDifficulty: BasicLearning Objective: 07-01 Assess how stock prices depend on future dividends and dividend growth.Section: 7.1Topic: Dividend yield3.The capital gains yield equals which one of the following?A.Total yieldB.Current discount rateC.Market rate of returnD.Dividend yieldE.Dividend growth rateRefer to section 7.1.Blooms: KnowledgeDifficulty: BasicLearning Objective: 07-01 Assess how stock prices depend on future dividends and dividend growth.Section: 7.1Topic: Capital gains yield4.Which one of the following types of securities has no priority in a bankruptcy proceeding?A.Convertible bondB.Senior debtC.Common stockD.Preferred stockE.Straight bond24.Which one of the following will increase the current value of a stock?A.Decrease in the dividend growth rateB.Increase in the required returnC.Increase in the market rate of returnD.Decrease in the expected dividend for next yearE.Increase in the capital gains yieldReview section 7.1.Blooms: ComprehensionDifficulty: IntermediateLearning Objective: 07-01 Assess how stock prices depend on future dividends and dividend growth.Section: 7.1Topic: Stock valuation25.The price of a stock at year 4 can be expressed as:A.D0 / (R + G4).B.D0 (1 + R)5.C.D1 (1 + R)5.D.D4/(R-g).E.D5/(R-g).Refer to section 7.1.Blooms: KnowledgeDifficulty: BasicLearning Objective: 07-01 Assess how stock prices depend on future dividends and dividend growth.Section: 7.1Topic: Dividend growth model26.Delfinos expects to pay an annual dividend of $1.50 per share next year. What is the anticipated dividend for year 5 if the firm increases its dividend by 2 percent annually?A.$1.50 (1.02)1B.$1.50 (1.02)2C.$1.50 (1.02)3D.$1.50 (1.02)4E.$1.50 (1.02)5Refer to section 7.1.Blooms: ComprehensionDifficulty: BasicLearning Objective: 07-01 Assess how stock prices depend on future dividends and dividend growth.Section: 7.1Topic: Dividend growth27.The required return on a stock is equal to which one of the following if the dividend on the stock decreases by 1 percent per year?A.(P0/D1)-gB.(D1/P0)/gC.Dividend yield + capital gains yieldD.Dividend yield - capital gains yieldE.Dividend yield capital gains yieldRefer to section 7.1.Blooms: ComprehensionDifficulty: BasicLearning Objective: 07-01 Assess how stock prices depend on future dividends and dividend growth.Section: 7.1Topic: Required return28.Donuts Delite just paid an annual dividend of $1.10 a share. The firm expects to increase this dividend by 8 percent per year the following 3 years and then decrease the dividend growth to 2 percent annually thereafter. Which one of the following is the correct computation of the dividend for year 7?A.($1.10) (1.08 3) (1.02 4)B.($1.10) (1.08 3) (1.02 3)C.($1.10) (1.08)3 (1.02)4D.($1.10) (1.08)3 (1.02)3E.($1.10) (1.08)3 (1.02)2Refer to section 7.1.Blooms: ComprehensionDifficulty: BasicLearning Objective: 07-01 Assess how stock prices depend on future dividends and dividend growth.Section: 7.1Topic: Dividend growth29.Aardvark, Inc. pays a constant annual dividend. At the end of trading on Wednesday, the price of its stock was $28. At the end of trading on the following day, the stock price was $27. As a result of the decline in the stocks price, the dividend yield _ while the capital gains yield _.A.remained constant; remained constantB.increased; remained constantC.increased; increasedD.decreased; remained constantE.decreased; decreasedRefer to section 7.1.Blooms: ComprehensionDifficulty: BasicLearning Objective: 07-01 Assess how stock prices depend on future dividends and dividend growth.Section: 7.1Topic: Dividend an