J&J Foods wants to issue some 7 percent preferred stock that has a stated liquidating value of $100 a share

J&J Foods wants to issue some 7 percent preferred stock that has a stated liquidating value of $100 a share. The company has determined that stocks with similar characteristics provide a 12.8 percent rate of return. What should the offer price be?    A.  $37.26 B.  $41.38 C.  $48.20 D.  $54.69 E.  $62.60

95.	The preferred stock of Rail Lines, Inc., pays an annual dividend of $12.25 and sells for $59.70 a share. What is the rate of return on this security?    A.  19.38 percent B.  19.63 percent C.  20.52 percent D.  20.72 percent E.  20.84 percent R = $12.25/$59.70 = 20.52 percent

96.

Marie owns shares of Deltona Productions preferred stock which she says provides her with a constant 14.3 percent rate of return. The stock is currently priced at $45.45 a share. What is the amount of the dividend per share?    A.  $6.00 B.  $6.25 C.  $6.50 D.  $6.60 E.  $7.00 D = 0.143 × $45.45 = $6.50

97.	Zylo, Inc. preferred stock pays a $7.50 annual dividend. What is the maximum price you are willing to pay for one share of this stock today if your required return is 7.5 percent?    A.  $32.26 B.  $35.48 C.  $72.68 D.  $100.00 E.  $107.50 P0 = $7.50/0.075 = $100.00

A stock had annual returns of 3.6 percent, -8.7 percent, 5.6 percent, and 12.5 percent over the past four years.

What is the amount of the risk premium on a U.S. Treasury bill if the risk-free rate is 2.8 percent and the market rate of return is 8.35 percent?    A.  0.00 percent B.  2.80 percent C.  5.55 percent D.  8.35 percent E.  11.15 percent There is no excess return, or risk premium, for a risk-free security such as the T-bill.

68.

A stock had returns of 11 percent, -18 percent, -21 percent, 20 percent, and 34 percent over the past five years. What is the standard deviation of these returns?    A.  18.74 percent B.  20.21 percent C.  20.68 percent D.  24.01 percent E.  23.49 percent Average return = (0.11 - 0.18 - 0.21 + 0.20 + 0.34)/5 = .052; σ = √[1/(5 - 1)] [(0.11 - 0.052)2 + (-0.18 - 0.052)2 + (-0.21 -0.052)2 + (0.05 - 0.052)2 + (0.34 - 0.052)2] = 24.01 percent

69.

The common stock of Air United, Inc., had annual returns of 15.6 percent, 2.4 percent, -11.8 percent, and 32.9 percent over the last four years, respectively. What is the standard deviation of these returns?    A.  13.29 percent B.  14.14 percent C.  16.50 percent D.  17.78 percent E.  19.05 percent Average return = (0.156 + 0.024 - 0.118 + 0.329)/4 = 0.09775 σ = √[1/(4 - 1)] [(0.156 - 0.09775)2 + (0.024 - 0.09775)2 + (-0.118 - 0.09775)2 + (0.329 - 0.09775)2] = 19.05 percent

70.

A stock had annual returns of 3.6 percent, -8.7 percent, 5.6 percent, and 12.5 percent over the past four years. Which one of the following best describes the probability that this stock will produce a return of 22 percent or more in a single year?    A.  less than 0.1 percent B.  less than 0.5 percent but greater than 0.1 percent C.  less than 1.0 percent but greater the 0.5 percent D.  less than 2.5 percent but greater than 0.5 percent E.  less than 5 percent but greater than 2.5 percent Average return = (0.036 - 0.087 + 0.056 + 0.125)/4 = 0.0325 ∑ = √[1/(4 - 1)] [(0.036 - 0.0325)2 + (-0.087 - 0.0325)2 + (0.056 - 0.0325)2 + (0.125 - 0.0325)2] = 0.0883 Upper end of 95 percent range = 0.0325 + (2 × 0.0883) = 20.91 percent Upper end of 99 percent range = 0.0325 + (3 × 0.0883) = 29.75 percent A return of 22 percent or more in a single year has between a 1 percent and a 2.5 percent probability of occurring in any one year.

Jean's Warehouse has 16,000 shares of stock outstanding. The current market value of the firm is $768,000

Jean's Warehouse has 16,000 shares of stock outstanding. The current market value of the firm is $768,000. The company has retained earnings of $130,000, paid in surplus of $321,000, and a common stock account value of 16,000. The company is planning a 5-for-3 stock split. What will the retained earnings account value be after the split?    A.  $73,800 B.  $130,000 C.  $153,600 D.  $205,000 E.  $245,500 The retained earnings will remain at $130,000 as a stock split does not affect the balance.

84.

The common stock of Checkers, Inc. is selling for $56 a share and the par value per share is $1. Currently, the firm has a total market value of $812,000. How many shares of stock will be outstanding if the firm does a 3-for-2 stock split?    A.  9,667 shares B.  12,500 shares C.  14,500 shares D.  17,750 shares E.  21,750 shares Number of shares = ($812,000/$56) × 3/2 = 21,750 shares

85.

The common stock of Gillen Entertainment is selling for $65 a share. The par value per share is $1. Currently, the firm has a total market value of $936,000. How many shares of stock will be outstanding if the firm does a 5-for-2 stock split?    A.  4,800 shares B.  9,600 shares C.  18,000 shares D.  36,000 shares E.  32,200 shares Number of shares = ($936,000/$65) × 5/2 = 36,000 shares

86.	Purvis Lawn Products has 18,000 shares of stock outstanding at a market price of $5.50 a share. What will the market price per share be if the company does a 1-for-4 reverse stock split?    A.  $1.38 B.  $5.50 C.  $11.00 D.  $16.50 E.  $22.00 Market price = $5.50 × 4/1 = $22

Josh's, Inc. has 7,000 shares of stock outstanding with a par value of $1.00 per share and a market value of $32 a share

Josh's, Inc. has 7,000 shares of stock outstanding with a par value of $1.00 per share and a market value of $32 a share. The balance sheet shows $82,000 in the capital in excess of par account, $7,000 in the common stock account, and $64,800 in the retained earnings account. The firm just announced a 10 percent stock dividend. What is the value of the capital in excess of par account after the dividend?    A.  $76,000 B.  $82,000 C.  $97,700 D.  $103,700 E.  $104,400 Change in capital in excess of par = (7,000 shares × 0.10) × ($32 - $1) = $21,700 New capital in excess of par account balance = $82,000 + $21,700 = $103,700

66.

Randall's, Inc. has 20,000 shares of stock outstanding with a par value of $1.00 per share. The market value is $12 per share. The balance sheet shows $42,000 in the capital in excess of par account, $20,000 in the common stock account, and $50,500 in the retained earnings account. The firm just announced a 5 percent (small) stock dividend. What will the balance in the retained earnings account be after the dividend?    A.  $38,500 B.  $39,500 C.  $50,500 D.  $61,500 E.  $62,500 Retained earnings = [(20,000 shares × 0.05) × $12 × -1] + $50,500 = $38,500

67.

Southern Fried Chicken has 8,000 shares of stock outstanding with a par value of $1 per share and a market value of $34 per share. The balance sheet shows $45,000 in the capital in excess of par account, $8,000 in the common stock account, and $152,000 in the retained earnings account. The firm just announced a 5 percent stock dividend. What will total owners' equity be after the dividend?    A.  $185,800 B.  $199,000 C.  $205,000 D.  $206,800 E.  $212,200 Total equity will not change as this is a small stock dividend. Total equity = $45,000 + $8,000 + $152,000 = $205,000