Exam 8: Valuing Stocks

A firm has been losing sales due to technological obsolescence.It projects growth for the future to be −2 percent.Its recent dividend was $2.00.What is the value of this stock when the required return is 9 percent?

Suppose Walmart (WMT)recently earned a profit of $5.10 per share and has a P/E ratio of 16.25.The dividend has been growing at a 6 percent rate over the past few years.If this growth continues,what would be the stock price in five years if the P/E ratio remained unchanged? What would the price be if the P/E ratio declined to 12 in five years?

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:

A firm is expected to pay a dividend of $3.00 next year and $3.21 the following year.Financial analysts believe the stock will be at their target price of $80.00 in two years.Compute the value of this stock with a required return of 13 percent.

Studies of investor psychology have discovered that:

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?

A fast growing firm recently paid a dividend of $0.80 per share.The dividend is expected to increase at a rate of 30 percent rate for the next four years.Afterwards,a more stable 7 percent growth rate can be assumed.If a 10 percent discount rate is appropriate for this stock,what is its value?

Best Buy Co.(BBY)paid a $0.27 dividend per share in 2003,which grew to $0.49 in 2017.This growth is expected to continue.What is the value of this stock at the beginning of 2017 when the required rate of return is 17.23 percent?

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

Dividend yield is defined as:

Target Corp.(TGT)paid a $0.21 dividend per share in 2000,which grew to $0.52 in 2017.This growth is expected to continue.What is the value of this stock at the beginning of 2017 when the required rate of return is 14.77 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?

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

A firm is expected to pay a $4.00 dividend 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?

You would like to sell 100 shares of Pfizer,Inc.(PFE).The current bid and ask quotes are $27.22 and $27.25,respectively.You place a limit sell-order at $27.24.If the trade executes,how much money do you receive from the buyer?

Which of the following statements is incorrect?

Which of the following indices best reflects the ten sectors of the economy?

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?

The Standard & Poor's 500 Index includes:

Suppose that a firm's recent earnings per share and dividends per share are $2.50 and $1.00,respectively.Both are expected to grow at 10 percent.However,the firm's current P/E ratio of 22 seems high for this growth rate.The P/E ratio is expected to fall to 18 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 14 percent required rate.