[MASREV] MATERIAL 10: Time Value of Money and Valuation of Stocks and Bonds

1. Statement 1: Compound interest pays interest for each time period on the original investment plus the accumulated
interest.
Statement 2: When money is invested at compound interest, the growth rate is the interest rate
a. True; False
b. False; True
c. False; False
d. True; True
2. Statement 1: For a given amount, the lower the discount rate, the less the present value.
Statement 2: Comparing the values of undiscounted cash flows is analogous to comparing apples to oranges.
a. True; False
b. False; True
c. False; False
d. True; True
3. Statement 1: The present value of an annuity due equals the present value of an ordinary annuity times the discount
rate
Statement 2: A perpetuity is a special form of an annuity.
a. True; False
b. False; True
c. False; False
d. True; True
4. Statement 1: An annuity factor represents the future value of P1 that is deposited today.
Statement 2: Accrued interest declines with each payment on an amortizing loan.
a. True; False
b. False; True
c. False; False
d. True; True
5. Statement 1: Converting an annuity to an annuity due decreases the present value
Statement 2: The term "constant pesos" refers to equal payments for amortizing a loan.
a. True; False
b. False; True
c. False; False
d. True; True
6. Statement 1: Nominal pesos refer to the amount of purchasing power
Statement 2: The appropriate manner of adjusting for inflationary effects is to discount nominal cash flows with real
interest rates
a. True; False
b. False; True
c. False; False
d. True; True
7. Statement 1: An effective annual rate must be greater than an annual percentage rate.
Statement 2: The more frequent the compounding, the higher the future value, other things equal
a. True; False
b. False; True
c. False; False
d. True; True
8. Statement 1: An annual percentage rate (APR) is determined by annualizing the rate using compound interest.
Statement 2: A peso tomorrow is worth more than a peso today
a. True; False
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 b. False; True
c. False; False
d. True; True
9. Statement 1: To calculate present value, we discount the future value by some interest rate r, the discount rate.
Statement 2: The discount factor is used to calculate the present value of P1 received in year t.
a. True; False
b. False; True
c. False; False
d. True; True
10. Statement 1: You should never compare cash flows occurring at different times without first discounting them to a
common date.
Statement 2: As long as the interest rate is positive, the future value will always be larger than the present value given
any period of time.
a. True; False
b. False; True
c. False; False
d. True; True
11. An amortizing loan is one in which:
a. the principal remains unchanged with each payment.
b. accrued interest is paid regularly.
c. the maturity of the loan is variable.
d. the principal balance is reduced with each payment.
12. A stream of equal cash payments lasting forever is termed:
a. an annuity.
b. an annuity due.
c. an installment plan.
d. a perpetuity.
13. Which one of the following factors is fixed and thus cannot change for a specific perpetuity?
a. Present value
b. Payment amount
c. Interest rate
d. Discount rate
14. The present value of a perpetuity can be determined by:
a. multiplying the payment by the interest rate.
b. dividing the interest rate by the payment.
c. multiplying the payment by the number of payments to be made.
d. dividing the payment by the interest rate.
15. Which one of the following will increase the present value of an annuity, other things equal?
a. Increasing the interest rate
b. Decreasing the interest rate
c. Decreasing the number of payments
d. Decreasing the amount of the payment
16. Under which of the following conditions will a future value calculated with simple interest exceed a future value
calculated with compound interest at the same rate?
a. The interest rate is very high.
b. The investment period is very long.
c. The compounding is annually.
d. This is not possible with positive interest rates.
17. The concept of compound interest refers to:

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 a. earning interest on the original investment.
b. payment of interest on previously earned interest.
c. investing for a multiyear period of time.
d. determining the APR of the investment.
18. When an investment pays only simple interest, this means:
a. the interest rate is lower than on comparable investments.
b. the future value of the investment will be low.
c. the earned interest is nontaxable to the investor.
d. interest is earned only on the original investment.
19. Given a set future value, which of the following will contribute to a lower present value?
a. Higher discount rate
b. Fewer time periods
c. Less frequent discounting
d. Lower discount factor
20. Cash flows occurring in different periods should not be compared unless:
a. interest rates are expected to be stable.
b. the flows occur no more than one year from each other.
c. high rates of interest can be earned on the flows.
d. the flows have been discounted to a common date.
21. What is the future value of P10,000 on deposit for 5 years at 6% simple interest?
22. How much interest is earned in just the third year on a P1,000 deposit that earns 7% interest compounded annually?
23. How much interest will be earned in the next year on an investment paying 12% compounded annually if P100 was
just credited to the account for interest?
24. Assume the total expense for your current year in college equals P20,000. How much would your parents have needed
to invest 21 years ago in an account paying 8% compounded annually to cover this amount?
25. How long must one wait (to the nearest year) for an initial investment of P1,000 to triple in value if the investment
earns 8% compounded annually?
26. How much will accumulate in an account with an initial deposit of P100, and which earns 10% interest compounded
quarterly for 3 years?
27. How much must be deposited today in an account earning 6% annually to accumulate a 20% down payment to use in
purchasing a car one year from now, assuming that the car's current price is P20,000, and inflation will be 4%?
28. In calculating the present value of P1,000 to be received 5 years from today, the discount factor has been calculated to
be .7008. What is the apparent interest rate?
29. What will be the approximate population of the United States, if its current population of 300 million grows at a
compound rate of 2% annually for 25 years?
30. If the future value of an annuity due is P25,000 and P24,000 is the future value of an ordinary annuity that is
otherwise similar to the annuity due, what is the implied discount rate?
31. How much must be invested today in order to generate a 5-year annuity of P1,000 per year, with the first payment 1
year from today, at an interest rate of 12%?
32. The salesperson offers, "Buy this new car for P25,000 cash or, with an appropriate down payment, pay P500 per
month for 48 months at 8% interest." Assuming that the salesperson does not offer a free lunch, calculate the
"appropriate" down payment.
33. What is the present value of the following payment stream, discounted at 8% annually: P1,000 at the end of year 1,
P2,000 at the end of year 2, and P3,000 at the end of year 3?
34. You invested P1,200 three years ago. During the three years, you earned annual rates of return of 4.8%, 9.2%, and
11.6%. What is the value of this investment today?
35. You will be receiving cash flows of: P1,000 today, P2,000 at end of year 1, P4,000 at end of year 3, and P6,000 at end
of year 5. What is the present value of these cash flows at an interest rate of 7%?

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36. A cash-strapped young professional offers to buy your car with four, equal annual payments of P3,000, beginning 2
years from today. Assuming you're indifferent to cash versus credit, that you can invest at 10%, and that you want to
receive P9,000 for the car, should you accept and how much is the present value?
37. How much more is a perpetuity of P1,000 worth than an annuity of the same amount for 20 years? Assume an
interest rate of 10% and cash flows at the end of each period.
38. A corporation has promised to pay P1,000 20 years from today for each bond sold now. No interest will be paid on
the bonds during the 20 years, and the bonds are discounted at an interest rate of 7%, compounded semiannually.
Approximately how much should an investor pay for each bond?
39. Your car loan requires payments of P200 per month for the first year and payments of P400 per month during the
second year. The annual interest rate is 12% and payments begin in one month. What is the present value of this 2-
year loan?
40. What is the present value of a five-period annuity of P3,000 if the interest rate per period is 12% and the first payment
is made today?
41. Three thousand pesos is deposited into an account paying 10% annually to provide three annual withdrawals of
P1,206.34 beginning in one year. How much remains in the account after the second payment has been withdrawn?
42. What is the present value of a four-year annuity of P100 per year that begins 2 years from today if the discount rate is
9%?
43. If P120,000 is borrowed for a home mortgage, to be repaid at 9% interest over 30 years with monthly payments of
P965.55, how much interest is paid over the life of the loan?
44. P50,000 is borrowed, to be repaid in three equal, annual payments with 10% interest. Approximately how much
principal is amortized with the first payment?
45. You're ready to make the last of four equal, annual payments on a P1,000 loan with a 10% interest rate. If the amount
of the payment is P315.47, how much of that payment is accrued interest?
46. Statement 1: A bond's payment at maturity is referred to as its face value.
Statement 2: When the market interest rate exceeds the coupon rate, bonds sell for less than face value to provide
enough compensation to investors.
a. True; False
b. False; True
c. True; True
d. False; False
47. Statement 1: Current yield overstates the return of premium bonds since investors who buy a bond at a premium face
a capital loss over the life of the bond.
Statement 2: A bond's rate of return is equal to its coupon payment divided by the price paid for the bond.
a. True; False
b. False; True
c. True; True
d. False; False
48. Statement 1: Speculative-grade bonds have default risk; investment grade bonds do not.
Statement 2: A long-term investor would more likely be interested in a bond's current yield rather than its yield to
maturity.
a. True; False
b. False; True
c. True; True
d. False; False
49. Statement 1: The current yield measures the bond's total rate of return
Statement 2: Zero-coupon bonds are issued at prices below face value, and the investor's return comes from the
difference between the purchase price and the payment of face value at maturity.
a. True; False
b. False; True

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 c. True; True
d. False; False
50. The coupon rate of a bond equals:
a. its yield to maturity.
b. a defined percentage of its face value.
c. the yield to maturity when the bond sells at a discount.
d. the annual interest divided by the current market price.
51. Periodic receipts of interest by the bondholder are known as:
a. the coupon rate.
b. a zero-coupon.
c. coupon payments.
d. the default premium.
52. As the coupon rate of a bond increases, the bond's:
a. face value increases.
b. current price decreases.
c. interest payments increase.
d. maturity date is extended.
53. Assume a bond is currently selling at par value. What will happen if the bond's expected cash flows are discounted at a
rate lower than the bond's coupon rate?
a. The price of the bond will increase.
b. The coupon rate of the bond will increase.
c. The par value of the bond will decrease.
d. The coupon payments will be adjusted to the new discount rate.
54. When an investor purchases a P1,000 par value bond that was quoted at 97.162, the investor:
a. receives 97.162% of the stated coupon payments.
b. receives P971.62 upon the maturity date of the bond.
c. pays 97.162% of face value for the bond.
d. pays P10,971.62 for a P10,000 face value bond.
55. What happens to a discount bond as the time to maturity decreases?
a. The coupon rate increases.
b. The bond price increases.
c. The coupon rate decreases.
d. The bond price decreases.
56. Which of the following statements is correct for a 10% coupon bond that has a current yield of 7%?
a. The face value of the bond has decreased.
b. The bond's maturity value exceeds the bond's price.
c. The bond's internal rate of return is 7%.
d. The bond's maturity value is lower than the bond's price.
57. If an investor purchases a bond when its current yield is higher than the coupon rate, then the bond's price will be
expected to:
a. decline over time, reaching par value at maturity.
b. increase over time, reaching par value at maturity.
c. be less than the face value at maturity.
d. exceed the face value at maturity.
58. The current yield of a bond can be calculated by:
a. multiplying the price by the coupon rate.
b. dividing the price by the annual coupon payments.
c. dividing the price by the par value.
d. dividing the annual coupon payments by the price.

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59. A bond's par value can also be called its:
a. coupon payment.
b. present value.
c. market value.
d. face value.
60. A bond's yield to maturity takes into consideration:
a. current yield but not any price changes.
b. price changes but not the current yield.
c. both the current yield and any price changes.
d. neither the current yield nor any price changes.
61. The discount rate that makes the present value of a bond's payments equal to its price is termed the:
a. dividend yield.
b. yield to maturity.
c. current yield.
d. coupon rate.
62. Which one of the following bond values will change when interest rates change?
a. The expected cash flows
b. The present value
c. The coupon payment
d. The maturity value
63. Which one of the following is fixed for the life of a given bond?
a. Current price
b. Current yield
c. Yield to maturity
d. Coupon rate
64. If a bond investor's rate of return for a particular period equaled the bond's coupon rate, then during that period, the
bond's price:
a. increased.
b. decreased.
c. remained constant.
d. changed, but the direction of the change is irrelevant.
65. What is the relationship between a bondholder's rate of return and the bond's yield to maturity if he does not hold the
bond until it matures?
a. The rate of return will be lower than the yield to maturity.
b. The rate of return will be higher than the yield to maturity.
c. The rate of return will equal the yield to maturity.
d. There is no predetermined relationship between the rate of return and the yield to maturity.
66. If the coupon rate on an outstanding bond is lower than the relevant current interest rate, then the yield to maturity
will be:
a. lower than current interest rates.
b. equal to the coupon rate.
c. higher than the coupon rate.
d. lower than the coupon rate.
67. How does a bond dealer generate profits when trading bonds?
a. By maintaining bid prices lower than ask prices
b. By maintaining bid prices higher than ask prices
c. By retaining the bond's next coupon payment
d. By lowering the bond's coupon rate upon resale
68. The yield curve depicts the current relationship between:

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 a. bond yields and default risk.
b. bond maturity and bond ratings.
c. bond yields and maturity.
d. promised yields and default premiums.
69. The purpose of a floating-rate bond is to:
a. save interest expense for corporate issuers.
b. avoid making interest payments until maturity.
c. shift the yield curve.
d. offer rates that adjust to current market conditions.
70. Which of the following would not be associated with a zero-coupon bond?
a. Yield to maturity
b. Discount bond
c. Current yield
d. Interest-rate risk
71. Which one of the following bonds would be likely to exhibit a greater degree of interest rate risk?
a. A zero-coupon bond with 20 years until maturity
b. A coupon-paying bond with 20 years until maturity
c. A floating-rate bond with 20 years until maturity
d. A zero-coupon bond with 30 years until maturity
72. A "convertible bond" provides the option to convert:
a. a bond into shares of common stock.
b. fixed-rate coupon payments into variable-rate payments.
c. a zero-coupon bond to a coupon-paying bond.
d. a junk bond to a zero-coupon investment-grade bond.
73. Which one of the following must be correct for a bond currently selling at a premium?
a. Its coupon rate is variable.
b. Its current yield is lower than its coupon rate.
c. Its yield to maturity is higher than its coupon rate.
d. Its coupon rate is lower than the current market rate on similar bonds.
74. Investors who buy which type of bond will be guaranteed a capital loss if they hold the bond to maturity?
a. Discount bond
b. Premium bond
c. Zero-coupon bond
d. Junk bond
75. How much does the P1,000 to be received upon a bond's maturity in 4 years add to the bond's price if the appropriate
discount rate is 6%?
76. How much should you pay for a P1,000 bond with 10% coupon, annual payments, and 5 years to maturity if the
interest rate is 12%?
77. How much would an investor expect to pay for a P1,000 par value bond with a 9% annual coupon that matures in 5
years if the interest rate is 7%?
78. What is the current yield of a bond with a 6% coupon, 4 years until maturity, and a price quote of 84?
79. What is the coupon rate for a bond with 3 years until maturity, a price of P1,053.46, and a yield to maturity of 6%?
Interest is paid annually.
80. What is the yield to maturity for a bond paying P100 annually that has 6 years until maturity and sells for P1,000?
81. Consider a 3-year bond with a par value of P1,000 and an 8% annual coupon. If interest rates change from 8 to 6%
the effect on the bond's price?
82. What happens to the coupon rate of a P1,000 face value bond that pays P80 annually in interest if market interest
rates change from 9% to 10%?

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83. What is the rate of return for an investor who pays P1,054.47 for a 3-year bond with coupon of 6.5% and sells the
bond 1 year later for P1,037.19?
84. If a 4-year bond with a 7% coupon and a 10% yield to maturity is currently worth P904.90, how much will it be worth
1 year from now if interest rates are constant?
85. What price will be paid for a government treasury bond with an ask price of 135.4062 if the face value is P100,000?
86. You purchased a 6% annual coupon bond at par and sold it one year later for P1,015.16. What was your rate of return
on this investment if the face value at maturity was P1,000?
87. A bond is priced at P1,100, has 10 years remaining until maturity, and has a 10% coupon, paid semiannually. What is
the amount of the next interest payment?
88. Rosita purchased a bond for P989 that had a 7% coupon and semiannual interest payments. She sold the bond after 6
months and earned a total return of 4.8% on this investment. At what price, did she sell the bond?
89. A bond has a coupon rate of 8%, pays interest semiannually, sells for P960, and matures in 3 years. What is its yield to
maturity?
90. By how much will a bond increase in price over the next year if it currently sells for P925.16, has 5 years until
maturity, and an annual coupon rate of 7%? (Do not round intermediate calculations.)
91. What is the amount of the annual coupon payment for a bond that has 6 years until maturity, sells for P1,050, and has
a yield to maturity of 9.37%?
92. Two years ago bonds were issued at par with 10 years until maturity and a 7% annual coupon. If interest rates for that
grade of bond are currently 8.25%, what will be the market price of these bonds?
93. What is the total return to an investor who buys a bond for P1,100 when the bond has a 9% coupon and 5 years until
maturity, then sells the bond after 1 year for P1,085?
94. How much would an investor lose the first year if she purchased a 30-year zero-coupon bond with a P1,000 par value
and a 10% yield to maturity, only to see market interest rates increase to 12% one year later?
95. If an investor purchases a 3%, 5-year TIPS at its par value of P1,000 and the CPI increases 3% over each of the next 5
years, what will be the real value of the principal at maturity?
96. How much should you be prepared to pay for a 10-year bond with an annual coupon of 6% and a yield to maturity of
7.5%?
97. An investor buys a 5-year, 9% coupon bond for P975, holds it for 1 year, and then sells the bond for P985. What was
the investor's rate of return?
98. An investor buys a 10-year, 7% coupon bond for P1,050, holds it for 1 year, and then sells it for P1,040. What was the
investor's rate of return?
99. A bond has an ask quote of 99.5625 and a bid quote of 99.5475. How much will the bond dealer make on the
purchase and resell of a P100,000 bond?
100.How much would an investor need to receive in nominal return if he desires a real return of 4% and the rate of
inflation is 5%?
101.Statement 1: The dividend discount model indicates that the value of a stock is the present value of the dividends it
will pay over the investor's horizon, plus the present value of the expected stock price at the end of that horizon.
Statement 2: An excess of market value over the book value of equity can be attributed to going concern value
a. True; False
b. False; True
c. True; True
d. False; False
102.Statement 1: Securities with the same expected risk should offer the same expected rate of return.
Statement 2: If investors believe a company will have the opportunity to make very profitable investments in the
future, they will pay more for the company's stock today
a. True; False
b. False; True
c. True; True
d. False; False

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103.Statement 1: The dividend discount model should not be used to value stocks in which the dividend does not grow
Statement 2: If the stock prices follow a random walk, successive stock prices are not related
a. True; False
b. False; True
c. True; True
d. False; False
104.Statement 1: The liquidation value of a firm is equal to the book value of the firm.
Statement 2: If the market is efficient, stock prices should be expected to react only to new information that is
released.
a. True; False
b. False; True
c. True; True
d. False; False
105.Statement 1: The dividend yield of a stock is much like the current yield of a bond. Both ignore prospective capital
gains or losses.
Statement 2: The dividend discount model states that today's stock price equals the present value of all expected
future dividends.
a. True; False
b. False; True
c. True; True
d. False; False
106.The growth of mature companies is primarily funded by:
a. issuing new shares of stock.
b. issuing new debt securities.
c. reinvesting company earnings.
d. increasing accounts payable.
107.The sustainable growth rate represents the ____ rate at which a firm can grow:
a. maximum; while maintaining a constant debt-equity ratio.
b. maximum; based solely on internal financing.
c. minimum; while maintaining a constant debt-equity ratio.
d. minimum; based solely on internal financing.
108.The sustainable rate of growth:
a. increases as the dividend payout ratio increases.
b. must be moderate over the long-term even if it is high in the short-term.
c. assumes the debt-equity ratio will increase at the same rate as the growth rate.
d. must exceed the required rate of return to be used in the dividend discount model.
109.For a firm that repurchases its stock, the dividend discount model might best be applied to the firm's:
a. dividends plus its repurchases.
b. repurchases rather than its dividends.
c. free cash flows.
d. pre-repurchase earnings per share.
110.If the general sentiment of investors is pessimistic, stock prices are more apt to:
a. increase significantly.
b. increase slightly.
c. remain constant.
d. decline.
111.What is the difference between a fundamental analyst and a technical analyst?
a. Only a fundamental analyst believes markets are inefficient.
b. A technical analyst focuses on financial statement analysis.

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 c. Only a technical analyst helps keep the market efficient.
d. A fundamental analyst analyzes information such as earnings and asset values.
112.In the calculation of rates of return on common stock, dividends are _______ and capital gains are ______.
a. guaranteed; not guaranteed
b. guaranteed; guaranteed
c. not guaranteed; not guaranteed
d. not guaranteed; guaranteed
113.Which of the following values treats the firm as a going concern?
a. Market value
b. Book value
c. Liquidation value
d. Both market and book values
114.With respect to the notion that stock prices follow a random walk, several researchers have concluded that:
a. stock prices reflect a majority of available information about the firm.
b. successive price changes are predictable.
c. past stock price changes provide little useful information about current stock prices.
d. stock prices always rise excessively in January.
115.A firm's liquidation value is the amount:
a. necessary to repurchase all outstanding shares of common stock.
b. realized from selling all assets and paying off all creditors.
c. a purchaser would pay to acquire all of the firm's assets.
d. shown on the balance sheet as total owners' equity.
116.Which one of the following is least likely to account for an excess of market value over book value of equity?
a. Inaccurate depreciation methods
b. High rate of return on assets
c. The presence of growth opportunities
d. Valuable off-balance sheet assets
117.Firms with valuable intangible assets are more likely to show a(n):
a. excess of book value over market value of equity.
b. high going-concern value.
c. low liquidation value.
d. low P/E ratio.
118.Which of the following is inconsistent with a firm that sells for very near book value?
a. Low current earnings
b. Few, if any, intangible assets
c. High future earning power
d. Low, unstable dividend payment
119.The expected return on a common stock is equal to:
a. [(1 + dividend yield) × (1 + capital appreciation rate)] - 1.
b. the capital appreciation rate + dividend yield.
c. (1 + capital appreciation rate)/(1 + dividend yield).
d. the capital appreciation rate - dividend yield.
120.It is possible to ignore cash dividends that occur far into the future when using a dividend discount model because
those dividends:
a. will most likely be paid to a different investor.
b. will most likely not be paid.
c. have an insignificant present value.
d. have a minimal, if any, potential rate of growth.
121.If no price change occurs in a stock on the day that it announces its next dividend, it can be assumed that:

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 a. the stock market is inefficient.
b. the dividend was reduced.
c. the market was expecting this information.
d. technical analysts are not following this stock.
122.Reinvesting earnings into a firm will not increase the stock price unless:
a. the new paradigm of stock pricing is maintained.
b. true depreciation is less than reported depreciation.
c. the firm's dividends are growing also.
d. the ROE of new investments exceeds the firm's required return.
123.The required return on an equity security is comprised of a:
a. dividend yield and ROE.
b. current yield and a terminal value.
c. sustainable growth rate and a plowback yield.
d. dividend yield and a capital gains yield.
124.What is the minimum amount shareholders should expect to receive in the event of a complete corporate liquidation?
a. Market value of equity
b. Book value of equity
c. Zero
d. Shareholders may be required to pay to be liquidated.
125.Which one of the following is more likely to be responsible for a firm having a low PVGO?
a. ROE exceeds required return.
b. Plowback is very high.
c. Payout is very high.
d. Book value of equity is low.
126.Wilt's has earnings per share of P2.98 and dividends per share of P.35. What is the firm's sustainable rate of growth if
its return on assets is 14.6% and its return on equity is 18.2%?
127.A firm has 120,000 shares of stock outstanding, a sustainable rate of growth of 3.8, and P648,200 in free cash flows.
What value would you place on a share of this firm's stock if you require a 14% rate of return?
128.What dividend yield would be reported in the financial press for a stock that currently pays a P1 dividend per quarter
and the most recent stock price was P40?
129.If a stock's P/E ratio is 13.5 at a time when earnings are P3 per year and the dividend payout ratio is 40%, what is the
stock's current price?
130.What is the current price of a share of stock for a firm with P5 million in balance-sheet equity, 500,000 shares of stock
outstanding, and a price/book value ratio of 4?
131.A stock paying P5 in annual dividends currently sells for P80 and has an expected return of 14%. What might
investors expect to pay for the stock one year from now?
132.A stock currently sells for P50 per share, has an expected return of 15%, and an expected capital appreciation rate of
10%. What is the amount of the expected dividend?
133.If the dividend yield for year 1 is expected to be 5% based on a stock price of P25, what will the year 4 dividend be if
dividends grow annually at a constant rate of 6%?
134.Dani's just paid an annual dividend of P6 per share. What is the dividend expected to be in five years if the growth
rate is 4.2%?
135.What should be the price for a common stock paying P3.50 annually in dividends if the growth rate is zero and the
discount rate is 8%?
136.What should you pay for a stock if next year's annual dividend is forecast to be P5.25, the constant-growth rate is
2.85%, and you require a 15.5% rate of return?
137.What price would you pay today for a stock if you require a rate of return of 13%, the dividend growth rate is 3.6%,
and the firm recently paid an annual dividend of P2.50?

MASREV MATERIAL
138.What constant-growth rate in dividends is expected for a stock valued at P32.40 if next year's dividend is forecast at
P2.20 and the appropriate discount rate is 13.6%?
139.What rate of return is expected from a stock that sells for P30 per share, pays P1.54 annually in dividends, and is
expected to sell for P32.80 per share in one year?
140.ABC common stock is expected to have extraordinary growth of 20% per year for 2 years, after which the growth rate
will settle into a constant 6%. If the discount rate is 15% and the most recent dividend was P2.50, what should be the
approximate current share price?
141.What would be the approximate expected price of a stock when dividends are expected to grow at a 25% rate for 3
years, then grow at a constant rate of 5%, if the stock's required return is 13% and next year's dividend will be P4.00?
142.A company with a return on equity of 15% and a plowback ratio of 60% would expect a constant-growth rate of?
143.What is the plowback ratio for a firm that has earnings per share of P2.68 and pays out P1.75 per share in dividends?
144.A stock is expected to pay dividends of P1.20 per share in Year 1 and P1.35 per share in Year 2. After that, the
dividend is expected to increase by 2.5% annually. What is the current value of the stock at a discount rate of 14.5%?
145.Jefferson's recently paid an annual dividend of P1.31 per share. The dividend is expected to decrease by 4% each year.
How much should you pay for this stock today if your required return is 16%?
146.What is the expected constant-growth rate of dividends for a stock with a current price of P87, an expected dividend
payment of P5.40 per share, and a required return of 16%?
147.What is the value of the expected dividend per share for a stock that has a required return of 16%, a price of P45, and
a constant-growth rate of 12%?
148.What is the required return for a stock that has a constant-growth rate of 3.3%, a price of P25, an expected dividend
of P2.10, and a P/E ratio of 14.4?
149.What should be the price of a stock that offers a P4.32 annual dividend with no prospects of growth, and has a
required return of 12.5%?
150.Suzi owns 100 shares of AB stock. She expects to receive a P238 in dividends next year. She also expects the stock to
sell for P46 a share one year from now. What is the intrinsic value of this stock if the dividend payout ratio is 40% and
the discount rate is 13.5%?

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MASREV MATERIAL