# FINANCE

24. **Selling Stock with Commissions** At your full-service brokerage firm, it costs $110 per stock trade. How much money do you receive after selling 100 shares of Time Warner, Inc. (TMX), which trades at $22.62?

A. $2,152.00

B. $2,262.00

C. $2,372.00

D. $2,388.20

25. **Selling Stock with Commissions** At your full-service brokerage firm, it costs $120 per stock trade. How much money do you receive after selling 200 shares of Ralph Lauren (RL), which trades at $85.13?

A. $16,546.00

B. $16,906.00

C. $17,026.00

D. $17,146.00

26. **Buying Stock with a Market Order** You would like to buy shares of International Business Machines (IBM). The current bid and ask quotes are $96.17 and $96.24, respectively. You place a market buy-order for 100 shares that executes at these quoted prices. How much money did it cost to buy these shares?

A. $7.00

B. $9,617.00

C. $9,624.00

D. $19,241.00

27. **Buying Stock with a Market Order** You would like to buy shares of Nokia (NOK). The current bid and ask quotes are $20.13 and $20.15, respectively. You place a market buy-order for 300 shares that executes at these quoted prices. How much money did it cost to buy these shares?

A. $6.00

B. $6,039.00

C. $6,045.00

D. $12,084.00

28. **Selling Stock with a Limit Order** You would like to sell 100 shares of Pfizer, Inc. (PFE). The current bid and ask quotes are $27.22 and $27.25, respectively. You place a limit sell-order at $27.24. If the trade executes, how much money do you receive from the buyer?

A. $2,722.00

B. $2,724.00

C. $2,725.00

D. $5,446.00

29. **Selling Stock with a Limit Order** You would like to sell 400 shares of International Business Machines (IBM). The current bid and ask quotes are $96.24 and $96.17, respectively. You place a limit sell-order at $96.20. If the trade executes, how much money do you receive from the buyer?

A. $38,464.00

B. $38,468.00

C. $38,480.00

D. $38,496.00

30. **Value of a Preferred Stock** If a preferred stock from Pfizer Inc. (PFE) pays $3.00 in annual dividends, and the required return on the preferred stock is 7 percent, what’s the value of the stock?

A. $0.21

B. $0.43

C. $21.00

D. $42.86

31. **Value of a Preferred Stock** If a preferred stock from Ecology and Environment, Inc. (EEI) pays $2.50 in annual dividends, and the required return on the preferred stock is 5.8 percent, what’s the value of the stock?

A. $0.15

B. $0.43

C. $14.50

D. $43.10

32. **P/E Ratio and Stock Price** International Business Machines (IBM) has earnings per share of $6.85 and a P/E ratio of 15.19. What is the stock price?

A. $0.45

B. $2.22

C. $45.09

D. $104.05

33. **P/E Ratio and Stock Price** Pfizer, Inc. (PFE) has earnings per share of $2.09 and a P/E ratio of 11.02. What is the stock price?

A. $0.19

B. $5.27

C. $18.97

D. $23.03

34. **P/E Ratio and Stock Price** Ralph Lauren (RL) has earnings per share of $3.85 and a P/E ratio of 17.37. What is the stock price?

A. $0.22

B. $4.51

C. $22.16

D. $66.87

35. **Value of Dividends and Future Price** A firm is expected to pay a dividend of $2.00 next year and $2.14 the following year. Financial analysts believe the stock will be at their target price of $75.00 in two years. Compute the value of this stock with a required return of 10 percent.

A. $65.40

B. $66.67

C. $65.57

D. $79.14

36. **Value of Dividends and Future Price** A firm is expected to pay a dividend of $3.00 next year and $3.21 the following year. Financial analysts believe the stock will be at their target price of $80.00 in two years. Compute the value of this stock with a required return of 13 percent.

A. $50.00

B. $67.52

C. $67.82

D. $86.21

37. **Dividend Growth** Annual dividends of Wal-Mart Stores (WMT) grew from $0.23 in 2000 to $0.83 in 2007. What was the annual growth rate?

A. 2.61%

B. 20.12%

C. 37.29%

D. 260.87%

38. **Dividend Growth** Annual dividends of Pfizer, Inc. (PFE) grew from $0.38 in 2000 to $1.15 in 2007. What was the annual growth rate?

A. 2.02%

B. 17.14%

C. 28.95%

D. 202.63%

39. **Value a Constant Growth Stock** Financial analysts forecast Best Buy Company (BBY) growth for the future to be 13 percent. Their recent dividend was $0.49. What is the value of their stock when the required rate of return is 14.13 percent?

A. $3.92

B. $4.90

C. $43.36

D. $49.00

40. **Value a Constant Growth Stock** Financial analysts forecast Target Corp (TGT) growth for the future to be 11 percent. Their recent dividend was $0.52. What is the value of their stock when the required rate of return is 11.89 percent?

A. $5.25

B. $6.48

C. $58.43

D. $64.85

41. **Expected Return** American Eagle Outfitters (AEO) recently paid a $0.38 dividend. The dividend is expected to grow at a 15.5 percent rate. At the current stock price of $24.07, what is the return shareholders are expecting?

A. 15.50%

B. 15.52%

C. 17.08%

D. 17.32%

42. **Expected Return** The Buckle (BKE) recently paid a $0.90 dividend. The dividend is expected to grow at a 19 percent rate. At the current stock price of $43.17, what is the return shareholders are expecting?

A. 19.00%

B. 19.02%

C. 21.48%

D. 22.74%

43. **Expected Return** Home Depot (HD) recently paid a $0.90 dividend. The dividend is expected to grow at a 17 percent rate. At the current stock price of $33.08, what is the return shareholders are expecting?

A. 2.70%

B. 17.03%

C. 17.18%

D. 20.18%

44. **Dividend Initiation and Stock Value** A firm does not pay a dividend. It is expected to pay its first dividend of $0.10 per share in 2 years. This dividend will grow at 11 percent indefinitely. Using a 13 percent discount rate, compute the value of this stock.

A. $4.42

B. $4.59

C. $5.43

D. $7.21

45. **Dividend Initiation and Stock Value** A firm does not pay a dividend. It is expected to pay its first dividend of $0.15 per share in 3 years. This dividend will grow at 9 percent indefinitely. Using a 10 percent discount rate, compute the value of this stock.

A. $12.28

B. $12.40

C. $16.35

D. $16.50

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

24. **Selling Stock with Commissions** At your full-service brokerage firm, it costs $110 per stock trade. How much money do you receive after selling 100 shares of Time Warner, Inc. (TMX), which trades at $22.62?

A. $2,152.00

B. $2,262.00

C. $2,372.00

D. $2,388.20

25. **Selling Stock with Commissions** At your full-service brokerage firm, it costs $120 per stock trade. How much money do you receive after selling 200 shares of Ralph Lauren (RL), which trades at $85.13?

A. $16,546.00

B. $16,906.00

C. $17,026.00

D. $17,146.00

26. **Buying Stock with a Market Order** You would like to buy shares of International Business Machines (IBM). The current bid and ask quotes are $96.17 and $96.24, respectively. You place a market buy-order for 100 shares that executes at these quoted prices. How much money did it cost to buy these shares?

A. $7.00

B. $9,617.00

C. $9,624.00

D. $19,241.00

27. **Buying Stock with a Market Order** You would like to buy shares of Nokia (NOK). The current bid and ask quotes are $20.13 and $20.15, respectively. You place a market buy-order for 300 shares that executes at these quoted prices. How much money did it cost to buy these shares?

A. $6.00

B. $6,039.00

C. $6,045.00

D. $12,084.00

28. **Selling Stock with a Limit Order** You would like to sell 100 shares of Pfizer, Inc. (PFE). The current bid and ask quotes are $27.22 and $27.25, respectively. You place a limit sell-order at $27.24. If the trade executes, how much money do you receive from the buyer?

A. $2,722.00

B. $2,724.00

C. $2,725.00

D. $5,446.00

29. **Selling Stock with a Limit Order** You would like to sell 400 shares of International Business Machines (IBM). The current bid and ask quotes are $96.24 and $96.17, respectively. You place a limit sell-order at $96.20. If the trade executes, how much money do you receive from the buyer?

A. $38,464.00

B. $38,468.00

C. $38,480.00

D. $38,496.00

30. **Value of a Preferred Stock** If a preferred stock from Pfizer Inc. (PFE) pays $3.00 in annual dividends, and the required return on the preferred stock is 7 percent, what’s the value of the stock?

A. $0.21

B. $0.43

C. $21.00

D. $42.86

31. **Value of a Preferred Stock** If a preferred stock from Ecology and Environment, Inc. (EEI) pays $2.50 in annual dividends, and the required return on the preferred stock is 5.8 percent, what’s the value of the stock?

A. $0.15

B. $0.43

C. $14.50

D. $43.10

32. **P/E Ratio and Stock Price** International Business Machines (IBM) has earnings per share of $6.85 and a P/E ratio of 15.19. What is the stock price?

A. $0.45

B. $2.22

C. $45.09

D. $104.05

33. **P/E Ratio and Stock Price** Pfizer, Inc. (PFE) has earnings per share of $2.09 and a P/E ratio of 11.02. What is the stock price?

A. $0.19

B. $5.27

C. $18.97

D. $23.03

34. **P/E Ratio and Stock Price** Ralph Lauren (RL) has earnings per share of $3.85 and a P/E ratio of 17.37. What is the stock price?

A. $0.22

B. $4.51

C. $22.16

D. $66.87

35. **Value of Dividends and Future Price** A firm is expected to pay a dividend of $2.00 next year and $2.14 the following year. Financial analysts believe the stock will be at their target price of $75.00 in two years. Compute the value of this stock with a required return of 10 percent.

A. $65.40

B. $66.67

C. $65.57

D. $79.14

36. **Value of Dividends and Future Price** A firm is expected to pay a dividend of $3.00 next year and $3.21 the following year. Financial analysts believe the stock will be at their target price of $80.00 in two years. Compute the value of this stock with a required return of 13 percent.

A. $50.00

B. $67.52

C. $67.82

D. $86.21

37. **Dividend Growth** Annual dividends of Wal-Mart Stores (WMT) grew from $0.23 in 2000 to $0.83 in 2007. What was the annual growth rate?

A. 2.61%

B. 20.12%

C. 37.29%

D. 260.87%

38. **Dividend Growth** Annual dividends of Pfizer, Inc. (PFE) grew from $0.38 in 2000 to $1.15 in 2007. What was the annual growth rate?

A. 2.02%

B. 17.14%

C. 28.95%

D. 202.63%

39. **Value a Constant Growth Stock** Financial analysts forecast Best Buy Company (BBY) growth for the future to be 13 percent. Their recent dividend was $0.49. What is the value of their stock when the required rate of return is 14.13 percent?

A. $3.92

B. $4.90

C. $43.36

D. $49.00

40. **Value a Constant Growth Stock** Financial analysts forecast Target Corp (TGT) growth for the future to be 11 percent. Their recent dividend was $0.52. What is the value of their stock when the required rate of return is 11.89 percent?

A. $5.25

B. $6.48

C. $58.43

D. $64.85

41. **Expected Return** American Eagle Outfitters (AEO) recently paid a $0.38 dividend. The dividend is expected to grow at a 15.5 percent rate. At the current stock price of $24.07, what is the return shareholders are expecting?

A. 15.50%

B. 15.52%

C. 17.08%

D. 17.32%

42. **Expected Return** The Buckle (BKE) recently paid a $0.90 dividend. The dividend is expected to grow at a 19 percent rate. At the current stock price of $43.17, what is the return shareholders are expecting?

A. 19.00%

B. 19.02%

C. 21.48%

D. 22.74%

43. **Expected Return** Home Depot (HD) recently paid a $0.90 dividend. The dividend is expected to grow at a 17 percent rate. At the current stock price of $33.08, what is the return shareholders are expecting?

A. 2.70%

B. 17.03%

C. 17.18%

D. 20.18%

44. **Dividend Initiation and Stock Value** A firm does not pay a dividend. It is expected to pay its first dividend of $0.10 per share in 2 years. This dividend will grow at 11 percent indefinitely. Using a 13 percent discount rate, compute the value of this stock.

A. $4.42

B. $4.59

C. $5.43

D. $7.21

45. **Dividend Initiation and Stock Value** A firm does not pay a dividend. It is expected to pay its first dividend of $0.15 per share in 3 years. This dividend will grow at 9 percent indefinitely. Using a 10 percent discount rate, compute the value of this stock.

A. $12.28

B. $12.40

C. $16.35

D. $16.50

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