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. 1, What classification of common stock would you recommend to Ji? 2, Calculate the P/E ratio and the dividend payout ratio for this stock. Round your answers to the nearest whole number. 3, Given this information and your recommendation, would this stock be an appropriate purchase for Ji? Why or why not?
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.
1, What classification of common stock would you recommend to Ji?
2, Calculate the P/E ratio and the dividend payout ratio for this stock. Round your answers to the nearest whole number.
3, Given this information and your recommendation, would this stock be an appropriate purchase for Ji? Why or why not?
Trending now
This is a popular solution!
Learn your way
Includes step-by-step video
Step by step
Solved in 3 steps
