Exam 8: Valuing Stocks

A firm is expected to pay a dividend of $2.00 next year and $3.75 the following year. Financial analysts believe the stock will be at their price target of $125.00 in two years. Compute the value of this stock with a required rate of return of 15 percent.

Coca-Cola recently paid a $3.00 dividend. Investors expect a 12 percent return on this stock. What is the difference in price if Coca-Cola is expected to grow at 7 percent versus 8 percent?

International Business Machines (IBM) has earnings per share of $6.85 and a P/E ratio of 15.19. What is the stock price?

Suppose that a firm's recent earnings per share and dividend per share are $2.50 and $1.00, respectively. Both are expected to grow at 5 percent. However, the firm's current P/E ratio of 23 seems high for this growth rate. The P/E ratio is expected to fall to 19 within five years. Compute a value for this stock. Assume a 10 percent required rate.

We often use the P/E ratio model with the firm's growth rate to estimate

At your discount brokerage firm, it costs $10.50 per stock trade. How much money do you need to buy 100 shares of Apple (AAPL), which trades at $202.64?

ABC has a net profit margin of 3.3 percent on sales of $10,000,000. The firm has 50,000 shares outstanding. If the firm's P/E is 19 times, how much is the stock selling for?

A stock is expected to pay a $4.00 dividend per share. The growth rate is expected to be 5 percent. If investors demand 10 percent on this stock, what is the expected price of the stock 10 years from now?

JPM has earnings per share of $3.75 and P/E of 47. What is the stock price?

You would like to buy shares of International Business Machines (IBM). The current bid and ask quotes are $103.25 and $103.30, respectively. You place a market buy-order for 200 shares that executes at these quoted prices. How much money did it cost to buy these shares?

At your discount brokerage firm, it costs $8.50 per stock trade. How much money do you need to buy 200 shares of Apple (AAPL), which trades at $171.54?

ABC has a net profit margin of 4.3 percent on sales of $12,000,000. The firm has 250,000 shares outstanding. If the firm's P/E is 16 times, how much is the stock selling for?

GEN has 10 million shares outstanding and a stock price of $89.25. What is GEN's market capitalization?

A firm's recent dividend was $4.00 per share. The stock is selling in the market place for $55.00 per share. If investors are demanding 12 percent on this stock, what is this stock's growth rate?

Which of the following is incorrect with respect to limit orders?

You would like to buy shares of Nokia (NOK). The current bid and ask quotes are $20.13 and $20.15, respectively. You place a market buy-order for 300 shares that executes at these quoted prices. How much money did it cost to buy these shares?

Sally has researched GLE and wants to pay no more than $50 for the stock. Currently, GLE is trading in the market for $54. Sally would be best served to