Examen 1. Etapa 1 Equity

Which of the following statements best describes a key feature that distinguishes common shares from most fixed-income securities?

An investor purchases a class of preferred shares whose dividend rate is reset every five years based on a reference rate plus a fixed spread. This preferred share is best described as:

A company omits the dividend on its preferred stock for two consecutive years. In the third year, before any dividend can be paid to common shareholders, the company must pay all previously omitted preferred dividends plus the current one. This preferred stock is best described as:

A company issues Class A shares carrying one vote each and Class B shares carrying ten votes each, while both classes receive identical dividends. This structure is best described as one in which the two classes differ in:

Under a statutory (straight) voting process, a shareholder who owns 500 shares and faces the election of four directors may cast:

Cumulative voting differs from statutory voting primarily because cumulative voting:

When a company sells newly issued shares to investors in an initial public offering, this transaction takes place in the:

Which of the following best describes a primary function of the secondary equity market?

A seasoned (follow-on) offering differs from an initial public offering primarily in that a seasoned offering:

A company announces a share repurchase program in place of a comparable cash dividend. Compared with paying the cash dividend, the repurchase is most likely to result in:

An investor holds 200 shares of a stock trading at USD 60 per share just before a 3-for-2 stock split. Immediately after the split, the investor’s holding is most accurately described as:

A firm executes a 1-for-4 reverse stock split. The primary purpose of a reverse split is most likely to:

An analyst concludes that a stock’s estimated intrinsic value exceeds its current market price. The stock is best described as:

An analyst’s ability to profit from a perceived difference between an equity’s intrinsic value and its market price most critically depends on the assumption that:

A company has a market capitalization of USD 500 million, total debt of USD 120 million, and cash and cash equivalents of USD 30 million. Its enterprise value is closest to:

An analyst is choosing between a dividend discount model (DDM) and a free-cash-flow-to-equity (FCFE) model. A DDM is most appropriate when the company:

When valuing equity using a free-cash-flow-to-the-firm (FCFF) model versus a free-cash-flow-to-equity (FCFE) model, the appropriate discount rates are, respectively:

A residual income model estimates equity value as the current book value of equity plus the present value of expected:

A stock is expected to pay a dividend of USD 2.10 next year. If the required return on equity is 11% and dividends are expected to grow at a constant 4% indefinitely, the intrinsic value per share is closest to:

A company just paid an annual dividend of USD 2.00 (D0). Dividends are expected to grow at 4% forever and the required return is 10%. The intrinsic value per share is closest to: