Exam 6: Common Stock Valuation

The Retail Box has a historical P/CF ratio of 21.5. The current CFPS is $1.42 and the projected CFPS growth rate is 5.6 percent. The current EPS is $1.02. What is the expected price of this stock one year from now?

You are considering buying shares of stock in the Steel Mill Corporation. The forecast for the firm is steady growth over the next decade. The firm just paid its annual dividend of $1.42 per share and has plans to increase that amount by 4 percent annually, indefinitely. You require a 12.5 percent return on this type of security. What is your estimate of the value of this stock ten years from now?

Wholesale Foods common stock is valued at $28.95 per share. The firm pays annual dividends which increase at a constant rate. The last dividend paid was $1.10. The required return is 8 percent. What is the dividend growth rate?

Currently, Southern Foods has sales of $1.32 million, net profit of $521,400, and 125,000 shares of stock outstanding. The sales and net profit are each expected to grow by 6 percent annually. The historical P/S ratio is 7.8. What is the expected price of this stock one year from now?

What is beta?

Lansing Corporation reported net income of $65 million for last year. Depreciation expense totaled $15 million and capital expenditures came to $6 million. Free cash flow is expected to grow at a rate of 4.5 percent for the foreseeable future. Lansing faces a 21 percent tax rate and has a .35 debt to equity ratio with $260 million (market value)in debt outstanding. Lansing's equity beta is 1.35, the risk-free rate is currently 5 percent, and the market risk premium is estimated to be 6.5 percent. What is the current total value of Lansing's equity (in millions)? (Assume Lansing had no interest expense for the year.)

A decrease in which one of the following will increase a firm's sustainable rate of growth?

Art Supplies has a net income of $138,600. The firm has $1.25 million in assets and $500,000 in liabilities. What is the return on equity?

The common stock of A.G. Tailor has a required return of 16 percent. The latest press release stated that last year's dividend was $.90 per share and that future dividends will increase by 15 percent for the following 3 years. After that, the dividend growth rate will be 3 percent indefinitely. What is one share of this stock worth to you today?

Over the past 4 years, a local firm has paid annual dividends of $1.52, $1.55, $1.60, and $1.68. What is the arithmetic average dividend growth rate?

Based on the dividend discount model, an increase in which of the following will lower the current value of a stock? I. amount of the next dividend II. dividend growth rate III. discount rate

Mountain View Nursery is a relatively young firm which just paid its first annual dividend of $.35 a share. Management projects dividend increases of 12 percent per year for 5 years followed by a constant growth rate of 3 percent annually. What is this stock worth today if the applicable discount rate is 11 percent?

A firm has paid annual dividends of $1.41, $1.43, $1.55, $1.62, $1.64, and $1.68 per share over the past 6 years, respectively. What is the geometric average growth rate for these dividends?

Bait 'n Tackle started paying dividends 4 years ago. The annual dividends thus far have been $.50, $.55, $.60, and $.65, respectively. What is the arithmetic average dividend growth rate?

How will the price of a stock be affected if the dividend growth rate is decreased?

Which one of the following statements concerning beta is correct?

Which one of the following will increase the current residual income of a firm?

Electronics Galore has historically had a P/E ratio of 22.1. This ratio is considered a good estimate of the future ratio. The firm currently has EPS of $1.78. These earnings are expected to increase by 5.0 percent next year. What is the expected price of this stock one year from now?

Southern Foods just paid an annual dividend of $1.10 a share. Management estimates the dividend will increase by 10 percent a year for the next 4 years. After that, the annual dividend growth rate is estimated at 3.2 percent. The required rate of return is 12 percent. What is the value of this stock today?

Wilson's Furniture is experiencing good growth so its management has decided to commence paying dividends starting next year. The first dividend will be $.50 a share with annual increases of 4 percent in the dividend amount. The discount rate is 10 percent. What will the value of this stock be four years from now?