Contemporary Engineering Economics (6th Edition)
Contemporary Engineering Economics (6th Edition)
6th Edition
ISBN: 9780134105598
Author: Chan S. Park
Publisher: PEARSON
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Chapter 7, Problem 4P
To determine

Calculate the return on investment.

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A preferred stock pays an annual dividend of $1.25. What is one share of this stock worth today if the rate of return is 13.5 percent? Show your work
Wu of Troy, New York, has $5,000 that he wants to invest in the stock market. Ji is in college on a scholarship and does not plan to use the $5,000 or any dividend income for another five years, when he plans to buy a home. He is currently considering a small company stock selling for $25 per share with an EPS of $1.25. Last year, the company earned $900,000, of which $250,000 was paid out in dividends.   What classification of common stock would you recommend to Ji? Calculate the P/E ratio and the dividend payout ratio for this stock. Round your answers to the nearest whole number c3.Given this information and your recommendation, would this stock be an appropriate purchase for Ji? Why or why not?
Suppose you buy a share of stock for $10 and sell it for $20; your profit is thus $10. If that happens within a year, your rate of return is an impressive 100% ($10/$10 = 1). If it takes five years, what would be the rate of return on your investment? (See Figure.)

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Contemporary Engineering Economics (6th Edition)

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