Practice Exercise 5

QUESTION 9 Stock Price in one year time ($) 92 Consider the following information about Delta Corporation: Current Stock Price ($) Probability (Pr) 44% 65 76 36% 57 20% The standard deviation of the return on Delta Corporation is closest to: O 47.26% 20.31% 66.98% 60.45%

Return on stockholders' equity:   20Y8 fill in the blank % 20Y7 fill in the blank % 20Y6 fill in the blank % 20Y5 fill in the blank % 20Y4 fill in the blank %

Solvency and Profitability Trend Analysis Addai Company has provided the following comparative information: 20Y8 20Υ7 20Y6 20Υ5 20Y4 Net income $273,406 $367,976 $631,176 $884,000 $800,000 Interest expense 616,047 572,003 528,165 495,000 440,000 Income tax expense 31,749 53,560 106,720 160,000 200,000 Total assets (ending balance) 4,417,178 4,124,350 3,732,443 3,338,500 2,750,000 Total stockholders' equity (ending balance) 3,706,557 3,433,152 3,065,176 2,434,000 1,550,000 Average total assets 4,270,764 3,928,396 3,535,472 3,044,250 2,475,000 Average total stockholders' equity 3,569,855 3,249,164 2,749,588 1,992,000 1,150,000 You have been asked to evaluate the historical performance of the company over the last five years. Selected industry ratios have remained relatively steady at the following levels for the last five years: 20Υ4-20Υ8 Return on total assets 28% Return on stockholders' equity 18% Times interest earned 2.7 Ratio of liabilities to stockholders' equity 0.4 Required: 1.…

1. stock     EPS     share price   Growth rate   A            $0.30     $4.80        4% B           $0.40     $5.50        6% C          $0.50     $7.50        7% D         $0.60     $8.00        5% Using the PEG ratio, rank the stocks in order of investment opportunity, the first having the best, the last having the worst. A. C,B,D,A   B. A,D,B,C  C.  C,D,B,A  D. B,D,C,A 2.Which of the following not true regarding financial statement A.Group financial statement be produced by each subsidiary as well as the parent entity B.Profit must be separated between members of the parent company and that of minority interest C.Minority interest share of equity represents that ‘part of a subsidiary’s equity not allocated to members of the parent company. D.Group financial statements must be produced by the parent entity only. E.None of the options provided.

Financial accounting question

Which of the following capital structures is optimal? Debt Equity EPS Stock Price 40% 60% $2.95 $26.50 50% 50% $3.05 $28.90 60% 40% $3.18 $31.20 70% 30% $3.31 $30.00 80% 20% $3.42 $30.40   Question 1 options:   40% debt   50% debt   60% debt   70% debt   80% debt

Price Forward Dividend 1T Target Est $75.20 $0.80 $87.76 Given the information in the table, if t he stock has a required return of 14.8%, what is the value of the stock

Question content area top Part 1 ​(Common stock​ valuation)  Assume the​ following:   •   the​ investor's required rate of return is 14.5 ​percent, •   the expected level of earnings at the end of this year ​(E1​) is ​$6​, •   the retention ratio is 40 ​percent, •   the return on equity ​(ROE​) is 14 percent​ (that is, it can earn 14 percent on reinvested​ earnings), and •   similar shares of stock sell at multiples of 6.742 times earnings per share.   ​Questions:   a.  Determine the expected growth rate for dividends. b.  Determine the price earnings ratio ​(P​/E1​). c.  What is the stock price using the ​P/E ratio valuation​ method? d.  What is the stock price using the dividend discount​ model? e.  What would happen to the ​P/E ratio ​(P​/E1​) and stock price if the company increased its retention rate to 80 percent​ (holding all else​ constant)? What would happen to the ​P/E ratio ​(P​/E1​) and stock price if the company paid out all its earnings in the form of​ dividends?…

What is the price of a stock at the end of Year 1 (P1) if the dividend for Year 2 (D2) is $5, the price at the end of Year 2 (P2) is $20, and the discount rate is 10 percent? (Round your answer to two decimal places.) Multiple choice question. $22.73 $25.00 $19.73 $18.18

Given Investment E(R) σ Stock A $15,000 10% 10% Stock B $5,000 5% 25% Total $20,000 and Corr(AB) = PAB = −0.25. Find the Covariance between returns of A and B -0.00525 O 0.0625 -0.00625 0.00625 -0.0625

Question 3 The price history of stock ABC from year 0 to year 2 is as follows: Po P₁ P₂ $50 $40 $60 a. What are the holding-period returns of stock ABC for the first year, for the second year, and for the entire period? b. What are the arithmetic and geometric average returns over this 2-year period? c. The price and dividend history of stock XYZ from year 0 to year 2 are as follows: Year Price Dividend 0 $100 1 ? $0 2 $100 $8 The price of stock XYZ in year 1 is not known. The holding-period return of stock XYZ in the second year (from year 1 to year 2) is 20%. What is the capital gains yield in the second year?

10-7 What is the geometric average return of a stock with the following share price history? Year Share price 1 $20 2 $22 3 $24 4 $26 5 $28 Select one: a. 9.09% b. 8.78% c. 8.33% d. 7.69% e. 6.48%

1 2 A Investment 3 Broad Stock Market Index 4 Small Capitalization Market Index 5 Local Casino 6 7 8 9 10 Yearly Daily Monthly Time Period B Probability of Price Increase, Daily Time 0.5030 0.5005 0.4900 1 30 365 C Probability of Price Decrease, Daily Expected Return: Daily 15 (Use cells A3 to D10 from the given information to complete this question.) 16 17 Stock Name 18 Broad Stock Market Index 19 Small Capitalization Market Index 20 Local Casino 21 22 0.4970 0.4995 0.5100 D Expected Return: Monthly Size of Price Change 0.0550 0.1050 0.0500 E 11 12 Required: 13 Using the information in the tables above, please calculate the expected return of each investment over one day, one month, and one year. 14 Expected Return Yearly F பட G

10 6 points Use the Black-Scholes formula for the following stock: Time to expiration 6 months Standard deviation 53% per year Exercise price $43 Stock price $43 Annual interest rate 3% Dividend 0 eBook Recalculate the value of the call with the following changes: a. Time to expiration b. Standard deviation Print c. Exercise price References d. Stock price e. Interest rate 3 months 25% per year $49 $49 5% Select each scenario independently. Note: Round your answers to 2 decimal places. Value of the Call Option a. C falls to b. C falls to c. C falls to d. C rises to e. C rises to Check my work

Stock Price ($) Dividend Yield WSR 16 7 HCC 56 2 SNDK 80 2 You invested a total of $11,200 in shares of the 3 stocks shown above and expected to earn $304 in annual dividends. If you purchased a total of 250 shares. How many of each did you purchase? You are to do this problem using the Gauss Jordan method shown in the book and in our recorded sessions. Show each matrix step as I have modelled for you.

A4 5c Consider the following information on three stocks in four possible future states of the economy:    State of economy Probability of state of economy Stock A Stock B Stock C Boom 0.3 0.35 0.45 0.38 Good 0.3 0.15 0.20 0.12 Poor 0.3 0.05 –0.10 –0.05 Bust 0.1 0.00 –0.30 –0.10  stock A: State of economy Probability Rate of return Average (a) (b) (c) (d = b × c)(d = b × c) Boom 0.3 0.35 0.105 Good 0.3 0.15 0.045 Poor 0.3 0.05 0.015 Bust 0.1 0 0 Expected rate of return 0.165   stock B: State of economy Probability Rate of return Average (a) (b) (c) (d = b × c)(d = b × c) Boom 0.3 0.45 0.135 Good 0.3 0.2 0.06 Poor 0.3 -0.1 -0.03 Bust 0.1 -0.3 -0.03 Expected rate of return 0.135 Stock C: State of economy Probability Rate of return Average (a) (b) (c) (d = b × c)(d = b…

7

A B C O 144.67 O 141.67 O $133.81 Stock O 131.81 Shares 1,000 5,000 3,000 Based on Table 3 the three securities comprise an index. Calculate the market value weighted index for time period t+1? Price_t $45 $24 $15 Price_t+1 $64 $26 $29

2 Suppose a stock had an initial price of $74 per share, paid a dividend of $1.65 per share during the year, and had an ending share price of $83. Compute the percentage total return. 3 4 5 6 Initial price 7 Dividend paid 8 Ending share price 9 10 (Use cells A6 to B8 from the given information to complete this question.) 11 Input area: 12 Output area: 13 14 Total return 15 $74 $1.65 $83

Use the information below to answer the question 52WHI 52WLo Ticker Div Yield% P/E Vol 00s High Low Close Net Chg 52.53 28.31 KO 0.65 1.34 13.80 6,412 54.12 32.50? -0.81 What is the EPS for the stock? $3.52 O $2.94 O $3.08 O $2.12

1 2 Stock Name 3 Burrfoot Enterprises 20.50 $ $ 23.75 4 Majere Brothers Incorporated 1.50 $ 135.00 115.00 $ 95.00 $ 5 Uth Matar Limited 0.85 85.00 6 7 Dividend Payments Per Year 8 4 9 10 Required: 11 Using the information in the tables above, please calculate the dividend yield, the capital gains yield, and the holding period return for each stock. 12 13 (Use cells A2 to D8 from the given information to complete this question.) 14 15 Stock Name Dividend Yield Capital Gains Yield Holding Period Return 16 Burrfoot Enterprises 17 Majere Holdings 18 Uth Matar Limited 19 20 $ $ $ Price, 1/1/2022 Quarterly Dividend Price, 12/31/2022

Question content area top Part 1 ​(Preferred stock​ valuation)  ​Pioneer's preferred stock is selling for ​$21 in the market and pays a ​$2.70 annual dividend.   a.  If the​ market's required yield is 11 ​percent, what is the value of the stock for that​ investor? b.  Should the investor acquire the​ stock?       Question content area bottom Part 1 a.  The value of the stock for that investor is ​$enter your response here per share.  ​(Round to the nearest​ cent.) Part 2 b.  Should the investor acquire the​ stock?  ​(Select from the​ drop-down menus.)   The investor ▼   should should not acquire the stock because it is currently ▼   underpriced overpriced in the market.