33.
You are considering acquiring a common stock that you would like to hold for one year.
You expect to receive both $1.25 in dividends and $32 from the sale of the stock at the
end of the year. The maximum price you would pay for the stock today is _____ if you
wanted to earn a 10% return.
34.
You are considering acquiring a common stock that you would like to hold for one year.
You expect to receive both $0.75 in dividends and $16 from the sale of the stock at the
end of the year. The maximum price you would pay for the stock today is _____ if you
wanted to earn a 12% return.
35.
You are considering acquiring a common stock that you would like to hold for one year.
You expect to receive both $2.50 in dividends and $28 from the sale of the stock at the
end of the year. The maximum price you would pay for the stock today is _____ if you
wanted to earn a 15% return.
36.
You are considering acquiring a common stock that you would like to hold for one year.
You expect to receive both $3.50 in dividends and $42 from the sale of the stock at the
end of the year. The maximum price you would pay for the stock today is _____ if you
wanted to earn a 10% return.
37.
Paper Express Company has a balance sheet which lists $85 million in assets, $40 million
in liabilities, and $45 million in common shareholders’ equity. It has 1,400,000 common
shares outstanding. The replacement cost of the assets is $115 million. The market share
price is $90.
What is Paper Express’s book value per share?
38.
Paper Express Company has a balance sheet which lists $85 million in assets, $40 million
in liabilities, and $45 million in common shareholders’ equity. It has 1,400,000 common
shares outstanding. The replacement cost of the assets is $115 million. The market share
price is $90.
What is Paper Express’s market value per share?
39.
One of the problems with attempting to forecast stock market values is that
40.
The most popular approach to forecasting the overall stock market is to use
41.
Sure Tool Company is expected to pay a dividend of $2 in the upcoming year. The risk-free
rate of return is 4% and the expected return on the market portfolio is 14%. Analysts
expect the price of Sure Tool Company shares to be $22 a year from now. The beta of Sure
Tool Company’s stock is 1.25.
The market’s required rate of return on Sure’s stock is
42.
Sure Tool Company is expected to pay a dividend of $2 in the upcoming year. The risk-free
rate of return is 4% and the expected return on the market portfolio is 14%. Analysts
expect the price of Sure Tool Company shares to be $22 a year from now. The beta of Sure
Tool Company’s stock is 1.25.
What is the intrinsic value of Sure’s stock today?
43.
If Sure’s intrinsic value is $21.00 today, what must be its growth rate?
44.
Torque Corporation is expected to pay a dividend of $1.00 in the upcoming year. Dividends
are expected to grow at the rate of 6% per year. The risk-free rate of return is 5% and the
expected return on the market portfolio is 13%. The stock of Torque Corporation has a
beta of 1.2.
What is the return you should require on Torque’s stock?
45.
Torque Corporation is expected to pay a dividend of $1.00 in the upcoming year. Dividends
are expected to grow at the rate of 6% per year. The risk-free rate of return is 5% and the
expected return on the market portfolio is 13%. The stock of Torque Corporation has a
beta of 1.2.
What is the intrinsic value of Torque’s stock?
46.
Midwest Airline is expected to pay a dividend of $7 in the coming year. Dividends are
expected to grow at the rate of 15% per year. The risk-free rate of return is 6% and the
expected return on the market portfolio is 14%. The stock of Midwest Airline has a beta of
3.00. The return you should require on the stock is
47.
Fools Gold Mining Company is expected to pay a dividend of $8 in the upcoming year.
Dividends are expected to decline at the rate of 2% per year. The risk-free rate of return is
6% and the expected return on the market portfolio is 14%. The stock of Fools Gold Mining
Company has a beta of -0.25. The return you should require on the stock is
48.
High Tech Chip Company is expected to have
EPS
in the coming year of $2.50. The
expected
ROE
is 12.5%. An appropriate required return on the stock is 11%. If the firm has
a plowback ratio of 70%, the growth rate of dividends should be
49.
A company paid a dividend last year of $1.75. The expected
ROE
for next year is 14.5%. An
appropriate required return on the stock is 10%. If the firm has a plowback ratio of 75%,
50.
High Tech Chip Company paid a dividend last year of $2.50. The expected
ROE
for next
year is 12.5%. An appropriate required return on the stock is 11%. If the firm has a
plowback ratio of 60%, the dividend in the coming year should be
51.
Suppose that the average P/E multiple in the oil industry is 20. Dominion Oil is expected to
have an
EPS
of $3.00 in the coming year. The intrinsic value of Dominion Oil stock should
be
52.
Suppose that the average P/E multiple in the oil industry is 22. Exxon is expected to have
an
EPS
of $1.50 in the coming year. The intrinsic value of Exxon stock should be
53.
Suppose that the average P/E multiple in the oil industry is 16. Shell Oil is expected to
have an
EPS
of $4.50 in the coming year. The intrinsic value of Shell Oil stock should be
54.
Suppose that the average P/E multiple in the gas industry is 17. KMP is expected to have
an
EPS
of $5.50 in the coming year. The intrinsic value of KMP stock should be
55.
An analyst has determined that the intrinsic value of HPQ stock is $20 per share using the
capitalized earnings model. If the typical P/E ratio in the computer industry is 25, then it
would be reasonable to assume the expected
EPS
of HPQ in the coming year is
56.
An analyst has determined that the intrinsic value of Dell stock is $34 per share using the
capitalized earnings model. If the typical P/E ratio in the computer industry is 27, then it
would be reasonable to assume the expected EPS of Dell in the coming year will be
57.
An analyst has determined that the intrinsic value of IBM stock is $80 per share using the
capitalized earnings model. If the typical P/E ratio in the computer industry is 22, then it
would be reasonable to assume the expected
EPS
of IBM in the coming year is
58.
Old Quartz Gold Mining Company is expected to pay a dividend of $8 in the coming year.
Dividends are expected to decline at the rate of 2% per year. The risk-free rate of return is
6% and the expected return on the market portfolio is 14%. The stock of Old Quartz Gold
Mining Company has a beta of -0.25. The intrinsic value of the stock is
59.
Low Fly Airline is expected to pay a dividend of $7 in the coming year. Dividends are
expected to grow at the rate of 15% per year. The risk-free rate of return is 6% and the
expected return on the market portfolio is 14%. The stock of Low Fly Airline has a beta of
3.00. The intrinsic value of the stock is
60.
Sunshine Corporation is expected to pay a dividend of $1.50 in the upcoming year.
Dividends are expected to grow at the rate of 6% per year. The risk-free rate of return is
6% and the expected return on the market portfolio is 14%. The stock of Sunshine
Corporation has a beta of 0.75. The intrinsic value of the stock is
61.
Low Tech Chip Company is expected to have
EPS
of $2.50 in the coming year. The
expected
ROE
is 14%. An appropriate required return on the stock is 11%. If the firm has a
dividend payout ratio of 40%, the intrinsic value of the stock should be
62.
Risk Metrics Company is expected to pay a dividend of $3.50 in the coming year.
Dividends are expected to grow at a rate of 10% per year. The risk-free rate of return is 5%
and the expected return on the market portfolio is 13%. The stock is trading in the market
today at a price of $90.00.
What is the market capitalization rate for Risk Metrics?