46. P/E Ratio Model and Future Price Walmart (WMT) recently earned a profit of \$3.13 per share and has a P/E ratio of 14.22. The dividend has been growing at a 12.5 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 10 in five years.
A. \$6.08, \$5.04 respectively
B. \$72.22, \$50.40 respectively
C. \$80.20, \$56.40 respectively
D. \$86.46, \$60.80 respectively

47. P/E Ratio Model and Future Price Target Corp (TGT) recently earned a profit of \$3.57 earnings per share and has a P/E ratio of 17.3. The dividend has been growing at a 14 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 increased to 23 in five years.
A. \$118.85, \$158.01 respectively
B. \$137.19, \$182.39 respectively
C. \$173.87, \$231.15 respectively
D. \$308.81, \$410.55 respectively

48. Value of Future Cash Flows A firm recently paid a \$1.00 annual dividend. The dividend is expected to increase by 10 percent in each of the next four years. In the fourth year, the stock price is expected to be \$100. If the required rate for this stock is 14 percent, what is its value?
A. \$25.00
B. \$36.60
C. \$62.87
D. \$72.30

49. Value of Future Cash Flows A firm recently paid a \$0.30 annual dividend. The dividend is expected to increase by 8 percent in each of the next four years. In the fourth year, the stock price is expected to be \$60. If the required rate for this stock is 10 percent, what is its value?
A. \$15.00
B. \$20.41
C. \$42.13
D. \$45.30

50. Constant Growth Stock Valuation Best Buy Co (BBY) paid a \$0.27 dividend per share in 2003, which grew to \$0.49 in 2007. This growth is expected to continue. What is the value of this stock at the beginning of 2007 when the required rate of return is 17.23 percent?
A. \$2.84
B. \$42.24
C. \$49.03
D. \$50.78

51. Constant Growth Stock Valuation Target Corp (TGT) paid a \$0.21 dividend per share in 2000, which grew to \$0.52 in 2007. This growth is expected to continue. What is the value of this stock at the beginning of 2007 when the required rate of return is 14.77 percent?
A. \$3.52
B. \$55.32
C. \$62.97
D. \$63.49

52. Changes in Growth and Stock Valuation Consider a firm that had been priced using a 10 percent growth rate and a 14 percent required rate. The firm recently paid a \$1.00 dividend. The firm has just announced that because of a new joint venture, it will likely grow at a 12 percent rate. How much should the stock price change (in dollars and percentage)?
A. \$25, 1%
B. \$25, 100%
C. \$28.50, 1.04%
D. \$28.50, 104%

53. Changes in Growth and Stock Valuation Consider a firm that had been priced using a 6 percent growth rate and a 9 percent required rate. The firm recently paid a \$0.50 dividend. The firm has just announced that because of a new joint venture, it will likely grow at an 8 percent rate. How much should the stock price change (in dollars and percentage)?
A. \$33.33, 67%
B. \$33.33, 198%
C. \$36.33, 67%
D. \$36.33, 206%

54. Variable Growth A fast growing firm recently paid a dividend of \$0.50 per share. The dividend is expected to increase at a 25 percent rate for the next 3 years. Afterwards, a more stable 12 percent growth rate can be assumed. If a 15 percent discount rate is appropriate for this stock, what is its value?
A. \$5.00
B. \$22.62
C. \$25.75
D. \$36.46

55. Variable Growth A fast growing firm recently paid a dividend of \$1.00 per share. The dividend is expected to increase at a 25 percent rate for the next 3 years. Afterwards, a more stable 8 percent growth rate can be assumed. If a 10 percent discount rate is appropriate for this stock, what is its value?
A. \$12.50
B. \$75.93
C. \$83.13
D. \$120.24

56. P/E Model and Cash Flow Valuation Suppose that a firm’s recent earnings per share and dividends per share are \$3.00 and \$1.50, respectively. Both are expected to grow at 10 percent. However, the firm’s current P/E ratio of 20 seems high for this growth rate. The P/E ratio is expected to fall to 16 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.
A. \$31.68
B. \$40.15
C. \$46.89
D. \$60.00

57. P/E Model and Cash Flow Valuation 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.
A. \$37.51
B. \$37.64
C. \$42.14
D. \$72.47

58. At your discount brokerage firm, it costs \$9.95 per stock trade. How much money do you need to buy 200 shares of General Electric (GE), which trades at \$45.19?
A. \$9,038.00
B. \$4528.95
C. \$9,047.95
D. \$4,595.95

59. At your discount brokerage firm, it costs \$7.95 per stock trade. How much money do you receive after selling 250 shares of General Electric (GE), which trades at \$55.19?
A. \$14,037.95
B. \$11,958.55
C. \$12,174.95
D. \$13,789.55

60. A preferred stock from DLC pays \$3.00 in annual dividends. If the required return on the preferred stock is 9.3%, what is the value of the stock?
A. \$34.89
B. \$32.26
C. \$38.49
D. \$31.13

61. Ultra Petroleum (UPL) has earnings per share of \$1.75 and P/E of 42.56. What is the stock price?
A. \$74.48
B. \$76.68
C. \$85.68
D. \$112.98

62. JPM has earnings per share of \$3.75 and P/E of 47. What is the stock price?
A. \$174.08
B. \$176.25
C. \$185.95
D. \$112.98

63. A firm is expected to pay a dividend of \$2.00 next year and \$3.75 the following year. Financial analysts believe the stock will be at their price target of \$125.00 in two years. Compute the value of this stock with a required rate of return of 15%.
A. \$78.34
B. \$81.05
C. \$87.13
D. \$99.09

64. Financial analysts forecast ABC Inc. growth for the future to be 12%. ABC’s recent dividend was \$1.60. What is the value of ABC stock when the required return is 15%?
A. \$59.73
B. \$63.72
C. \$79.81
D. \$91.02

65. A fast growing firm recently paid a dividend of \$0.80 per share. The dividend is expected to increase at a rate of 30% rate for the next 4 years. Afterwards, a more stable 7% growth rate can be assumed. If a 10% discount rate is appropriate for this stock, what is its value?
A. \$60.48
B. \$60.18
C. \$61.34
D. \$73.86

66. A fast growing firm recently paid a dividend of \$1.00 per share. The dividend is expected to increase at a rate of 15% rate for the next 3 years. Afterwards, a more stable 6% growth rate can be assumed. If a 10% discount rate is appropriate for this stock, what is its value?
A. \$33.54
B. \$37.99
C. \$39.37
D. \$42.03

67. A firm recently paid a \$0.50 annual dividend. The dividend is expected to increase by 10% in each of the next three years. In the third year, the stock price is expected to be \$110. If the required return is 15%, what is its value?
A. \$62.53
B. \$68.95
C. \$73.71
D. \$78.67

68. Campbell Soup Co paid a \$1.55 dividend per share in 2004, which grew to \$1.95 in 2009. This growth is expected to continue. What is the value of this stock at the beginning of 2010 when the required return is 10.5 percent?
A. \$35.20
B. \$34.16
C. \$33.48
D. \$32.17

69. Consider a firm that had been priced using a 12 percent growth rate and a 16 percent required return. The firm recently paid a \$5.00 dividend. The firm has just announced that because of a new joint venture, it will likely grow at a 12.5 percent rate. How much should the stock price change (in dollars and percentage)?
A. \$21.50; 13.72%
B. \$21.50; 16.14%
C. \$20.71; 14.79%
D. \$20.71; 19.93%

70. Suppose that a firm’s recent earnings per share and dividend per share are \$2.50 and \$1.00, respectively. Both are expected to grow at 5 percent. However, the firm’s current P/E ratio of 23 seems high for this growth rate. The P/E ratio is expected to fall to 19 within five years. Compute a value for this stock. Assume a 10 percent required rate.
A. \$36.19
B. \$38.86
C. \$40.31
D. \$42.00

71. A firm has been losing sales due to technological obsolescence. It projects growth for the future to be -2%. Its recent divided was \$2.00. What is the value of this stock when the required return is 9%?
A. \$28.00
B. \$29.14
C. \$17.82
D. \$15.52

72. A firm has been losing sales due to technological obsolescence. It projects growth for the future to be -3%. Its recent divided was \$2.50. What is the value of this stock when the required return is 7%?
A. \$28.17
B. \$24.25
C. \$17.42
D. \$15.53

73. To list a stock on the NYSE, a company must meet minimum requirements that include all of the following except ____________________.
A. Firm size
B. Total number of stockholders