Exam 8: Valuing Stocks

A firm recently paid a $1.00 annual dividend. The dividend is expected to increase by 10 percent in each of the next four years. In the fourth year, the stock price is expected to be $100. If the required rate for this stock is 14 percent, what is its value?

We can estimate a stock's value by

Trading at physical exchanges like the New York Stock Exchange and the American Stock Exchange takes place

If on November 26, 2017, The Dow Jones Industrial Average closed at 12,743.40, which was down 237.44 that day. What was the return (in percent) of the stock market that day?

Suppose that a firm's recent earnings per share and dividends per share are $5.00 and $1.00, respectively. Both are expected to grow at 5 percent. However, the firm's current P/E ratio of 18 seems high for this growth rate. The P/E ratio is expected to fall to 10 within five years. Compute a value for this stock by first estimating the dividends over the next five years and the stock price in five years. Then discount these cash flows using a 12 percent required rate.

At your full-service brokerage firm, it costs $110 per stock trade. How much money do you receive after selling 100 shares of Time Warner, Inc. (TMX), which trades at $22.62?

A firm's stock is selling at $75.00 per share. Its growth rate is 10 percent and investors demand 17 percent on this stock. What is the firm's expected dividend?

JUJU's dividend next year is expected to be $5.50. It is trading at $45 and is expected to grow at 4 percent per year. What is JUJU's dividend yield and capital gain?

Which of these investors earn returns from receiving dividends and from stock price appreciation?

Annual dividends of Walmart Stores (WMT) grew from $0.23 in 2000 to $0.83 in 2007. What was the annual growth rate?

Financial analysts forecast ABC Inc. growth for the future to be 12 percent. ABC's recent dividend was $1.60. What is the value of ABC stock when the required return is 15 percent?

Investors sell stock at the

If a preferred stock from Ecology and Environment, Inc. (EEI) pays $2.50 in annual dividends, and the required return on the preferred stock is 5.8 percent, what's the value of the stock?

Which of the following is an electronic stock market without a physical trading floor?

A firm's recent dividend was $2.00 per share. The stock is selling in the market place for $50.00 per share. If investors are demanding 10 percent on this stock, what is this stock's growth rate?

Stock valuation model dynamics make clear that higher growth rates lead to

A stock is expected to pay a $5.00 dividend per share. The growth rate is expected to be −2 percent. If investors demand 8 percent on this stock, what is the expected price of the stock five years from now?

A firm does not pay any dividends at this point in time. Which valuation method should be used on this stock?

Ralph Lauren (RL) has earnings per share of $3.85 and a P/E ratio of 17.37. What is the stock price?

A firm does not pay a dividend. It is expected to pay its first dividend of $0.10 per share in two years. This dividend will grow at 11 percent indefinitely. Using a 13 percent discount rate, compute the value of this stock.