Exam 7: Valuing Stocks

Credenza Industries is expected to pay a dividend of $1.20 at the end of the coming year.It is expected to sell for $62.00 at the end of the year.If its equity cost of capital is 8%,what is the expected capital gain from the sale of this stock at the end of the coming year?

Fanshaw Corporation is expected to pay an annual dividend of $0.20 per share in the coming year,and to trade for $15.15 at the end of the year.If investments with the same risk as Fanshaw's stock have an expected return of 10.75%,what is the most you would pay today for Fanshaw's stock?

Use the table for the question(s)below. -The table above shows the stock prices and multiples for a number of firms in the newspaper publishing industry.Another newspaper publishing firm (not shown)had sales of $620 million,EBITDA of $84 million,excess cash of $66 million,$14 million of debt,and 120 million shares outstanding.If the firm had an EPS of $0.48,what is the difference between the estimated share price of this firm if the average price-earnings ratio is used and the estimated share price if the average enterprise value/EBITDA ratio is used?

A stock is expected to pay $3.20 per share every year indefinitely and the equity cost of capital for the company is 10%.What price would an investor be expected to pay per share next year?

Bentham Books pays annual dividends and has just paid this year's dividend of $0.65.If its equity cost of capital is 12%,and dividends are expected to grow by 3% per year in the future,what is the value of Bentham's stock?

Use the figure for the question(s)below. -The above screen shot from Google Finance shows basic stock information for PepsiCo.If you owned 2000 shares of PepsiCo for the period shown,how much would you have earned in dividend payments?

Spacefood Products will pay a dividend of $2.40 per share at the end of this year.It is expected that this dividend will grow by 3% per year each year in the future.What will be the current value of a single share of Spacefood's stock if the firm's equity cost of capital is 10%?

Maple Corporation is expected to pay an annual dividend of $0.45 per share in the coming year,and to trade for $12.50 at the end of the year.If investments with the same risk as Maple's stock have an expected return of 6.95%,what is Maple's dividend yield?

The net present value (NPV)of a stock is calculated by discounting cash flows arising from this stock using the risk-free interest rate.

You expect that Bean Enterprises will have earnings per share of $2 for the coming year.Bean plans to retain all of its earnings for the next three years.For the subsequent two years,the firm plans on retaining 50% of its earnings.It will then retain only 25% of its earnings from that point forward.Retained earnings will be invested in projects with an expected return of 20% per year.If Bean's equity cost of capital is 12%,then the price of a share of Bean's stock is closest to:

Ashbury Inc.is expected to pay an annual dividend of $1.50 per share in the coming year,and to trade for $36.25 at the end of the year.If investments with the same risk as Ashbury's stock have an expected return of 8.75%,what is Ashbury's capital gain rate?

The Valuation Principle states that the value of a stock is equal to the present value (PV)of both the dividends and future sale price of that stock which the investor will receive.

You expect KT industries (KTI)will have earnings per share of $3 this year and expect that they will pay out $1.50 of these earnings to shareholders in the form of a dividend.KTI's return on new investments is 15% and their equity cost of capital is 12%.The value of a share of KTI's stock is closest to:

Use the table for the question(s)below. -Conundrum Mining is expected to generate the above free cash flows over the next four years,after which they are expected to grow at a rate of 5% per year.If the weighted average cost of capital is 12% and Conundrum has cash of $80 million,debt of $60 million,and 30 million shares outstanding,what is Conundrum's expected current share price?

Kilbright Corporation stock is currently trading at $73.29 per share and pays a dividend of $3.14 per share this year.The company's cost of equity is 13%.What is the expected annual growth rate of the company's dividends?

Wellington Corporation is expected to pay a monthly dividend of $0.12 for the next three years.If the current price of Wellington stock is $41.35,and Wellington's equity cost of capital is 15% per year,what price would you expect Wellington's stock to sell for at the end of the three years?

Aaron Inc.has 316 million shares outstanding.It expects earnings at the end of the year to be $602 million.The firm's equity cost of capital is 11.5%.Aaron pays out 50% of its earnings in total: 30% paid out as dividends and 20% used to repurchase shares.If Aaron's earnings are expected to grow at a constant 6% per year,what is Aaron's share price?

You expect KT industries (KTI)will have earnings per share of $3 this year and expect that they will pay out $1.50 of these earnings to shareholders in the form of a dividend.KTI's return on new investments is 15% and their equity cost of capital is 12%.The expected growth rate for KTI's dividends is closest to:

Use the table for the question(s)below. -Banco Industries expects sales to grow at a rapid rate over the next 3 years,but settle to an industry growth rate of 5% in year 4.The spreadsheet above shows a simplified pro forma for Banco Industries.Banco Industries has a weighted average cost of capital of 12%,$50 million in cash,$60 million in debt,and 18 million shares outstanding.If Banco Industries can reduce their operating expenses so that EBIT becomes 12% of sales,by how much will their stock price increase?

Which of the following tendencies of individual investors is called the disposition effect?