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00 LO 4. %24 Question 15 calculate weighted average cost of capital if : 1) share of debt from total capital is 25% and cost of debt is 8% 2)share of preference shares from total capital is 25% and the cost of preference shares is 10% 3)share of equity shares from total capital is 35% and the cost of equity shares is 15% 4)share of retained earning from total capital is 15% and the cost of retained earning is 6% Select one: a. 10.1% b. 11.1% c. None of them is correct d. 10.7% CLEAR MY CHOICE < PREVIOUS e Type here to search f2 f4 f5 84 2. 米 %23 3. 2. %24

QS 11-24 (Algo) Price-earnings ratio LO A1 Compute Topp Company's price-earnings (PE) ratio if its common stock has a market value of $23.79 per share and its earnings per share (EPS) is $3.90. Topp's key competitor, Lower Deck, has a price-earnings (PE) ratio of 9.5. For which company does the market have higher expectations of future performance? 52 Complete this question by entering your answers in the tabs below. Price Earnings Future Ratio Performance Compute Topp Company's price-earnings (PE) ratio if its common stock has a market value of $23.79 per share and its earnings per share (EPS) is $3.90. Price Earnings Ratio Choose Numerator: I Choose Denominator: = Price Earnings Ratio Price Earnings Ratio Price Earnings Ratio Future Performance > < Prev 7 of 7 Next here to search 99+ 69°F Cloudy 4- 41 144 144 96 5 3 41 6 RI 7T Y PI IN

@ 1 75% AT&T LTE 11:52 AM 48 Exit Rearden Metal Company has earnings per share of $2. It has 10 million shares outstanding and is trading at $20 per share. Rearden is thinking of buying Associated Steel, which has earnings per share of $1.25, 4 million shares outstanding, and a price per share of $15. There are no expected synergies from the transaction. Rearden will pay for Associated Steel by issuing new shares, and the exchange ratio will be such that, at current pre- announcement share prices for both firms, the offer represents a 20% premium to buy Associated Steel. How many new shares will Rearden have to issue? 3.6 million 8.3 million 1.2 million 4.9 million

O $36.90 O $52.52 Comparables $53.32 O $39.00 P/E P/BV P/S High Tech EPS BV per share Sales per share Company 1 19.70 7.5 2.5 2.00 11.50 15.00 Table 7 Company 2 21.20 7.9 2.1 Use Table 7. Assume company 1 and company 3 are in the tech sector and company 2 is in the consumer staples sector. Value High Tech based on the comparables approach with this new information. Company 3 17.201 6.7 2.7

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QUESTION 11 Song Corp's stock price at the end of last year was $23.50 and its earnings per share for the year were $1.30. What was its P/E ratio? a.17.17 b. 18.98 O c. 19.93 d. 18.08 e.20.93

PROBLEM 2–17A see images attached  Earnings Quality The following is an excerpt from a quarterly earnings announcement by American Express: American Express American Express Reports Record Quarterly Net Income of $648 Million QUARTER ENDED SEPTEMBER 30 Percentage Inc./(Dec.) 13.0% 12.4% 14.2% (1.2%) ($ millions except per share amounts) Net incomeNetrevenuesPer share net income (Basic) Average common shares outstanding Return on average equity 20X9 $ 648 $ 4,879 20X8 $ 574 $ 4,342 $ 1.45 446.0 25.3% $ 1.27 451.6 23.9% sub10963_ch02_066-131.qxd 4/5/13 3:39 PM Page 129 Chapter Two | Financial Reporting and Analysis 129 NINE MONTHS ENDED SEPTEMBER 30 Percentage Inc./(Dec.) 16.0% 12.2% 18.4% (2.0%) ($ millions except per share amounts) Net incomeNet revenuesPer share net income (Basic) Average common shares outstanding Return on average equity 20X9 $ 1,869 $14,211 $ 4.18 447.0 25.3% 20X8 $ 1,611 $12,662 $ 3.53 456.2 23.9%…

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