Your stock broker suggests you concentrate your portfolio on stocks with low P/Eratios. She explains that these firms are likely to be out of favor with investors, because they have a low price relative to their current earnings. Is this necessarily a good investment practice? Why or why not?
ABC, Inc. has a P/Eratio of 12 and maintains a dividend payout rate of 40%. The stock price of ABC, Inc. on January 1 is $32. What would the value of the stock be if the dividend payout ratio was 60%? (Please use Excel)
A measure of risk adjusted performance that is often used in practice is the Sharpe ratio. The Sharpe ratio is calculated as the risk premium of an asset divided by its standard deviation.
a.The standard deviations and returns for the funds over the past 10 years are listed below. Assuming a risk free rate of 4%, calculate t
1) A company's stock sells at a P/Eratio of 21 times earnings. It is expected to pay dividends of $2 per share in each of the next five years and to generate an EPS of $5 in year 5. Using the "dividends-and-earnings model" and a 12% discount rate, compute the stock's justified price.
2) A particular company currently has
An investor buys a stock for $40 per share and sells it for $45 after one year. Also, at the end of that year, the dividend per stock is $1. The company has 100,000 shares outstanding and a total profit for the year of $500,000. The price-earnings ratio for this firm at the time the stock was sold is?
Which of the following is correct regarding a two-for-one stock split?
a. The purpose of the split may be to decrease the value per share of the stock.
b. The purpose of the split is to make a distribution to the stockholders.
c. After the split, each stockholder will have a greater ownership interest in the corporat
6. The P/Eratio (price earnings) ratio for each stock is determined by dividing the price of a share of stock by the earnings per share reported by the company for the most recent four quarters. A sample of 10 stocks taken from the Wall Street Journal (on September 29th, 2000) provided the following P/Eratios:
5, 7, 9,