Corporate Finance
12th Edition
ISBN: 9781259918940
Author: Ross, Stephen A.
Publisher: Mcgraw-hill Education,
expand_more
expand_more
format_list_bulleted
Concept explainers
Videos
Textbook Question
Chapter 10, Problem 8CQ
Returns Two years ago, the Lake Minerals and Small Town Furniture stock prices were the same. The average annual return for both stocks over the past two years was 10 percent. Lake Minerals’ stock price increased 10 percent each year. Small Town Furniture’s stock price increased 25 percent in the first year and lost 5 percent last year. Do these two stocks have the same price today?
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Last year, Big W Company reported earnings per share of $2.50 when its stock was selling for$50.00. If its earnings this year increase by 10 percent and the P/E ratio remains constant, whatwill be the price of its stock? Explain.
One year ago, Barkley's stock sold for $28 a share. During last year, Barkley's paid $1.23 per share in dividends and saw its stock price increase by 7 percent for the year. Today, the firm announced that it will pay $1.30 per share in dividends this year. What do you know with certainty about the performance of Barkley's stock for this year? Multiple Choice The capital gains yield will be positive. The dividend yield for this year will be lower than it was last year. The total rate of return will be lower this year than it was last year. The total rate of return will be higher this year than it was last year. The dividend yield for this year will be higher than it was last year.
Last year, Rec Room Sports reported earnings per share of $7.80 when its stock price was $140.40. This year. its earnings increased by
25 percent. If the P/E ratio remains constant, what is likely to be the price of the Stock? (Round your answer to 2 declmal places.)
Pice bf thssoce
Chapter 10 Solutions
Corporate Finance
Ch. 10 - Investment Selection Given that Madrigal...Ch. 10 - Investment Selection Given that Sears was down by...Ch. 10 - Risk and Return We have seen that over long...Ch. 10 - Prob. 4CQCh. 10 - Effects of Inflation Look at Table 10.1 and Figure...Ch. 10 - Risk Premiums Is it possible for the risk premium...Ch. 10 - Prob. 7CQCh. 10 - Returns Two years ago, the Lake Minerals and Small...Ch. 10 - Prob. 9CQCh. 10 - Historical Returns The historical asset class...
Ch. 10 - Prob. 1QAPCh. 10 - Calculating Yields In Problem 1, what was the...Ch. 10 - Calculating Returns Rework Problems 1 and 2...Ch. 10 - Prob. 4QAPCh. 10 - Prob. 5QAPCh. 10 - Prob. 6QAPCh. 10 - Prob. 7QAPCh. 10 - Prob. 8QAPCh. 10 - Prob. 9QAPCh. 10 - Calculating Real Returns and Risk Premiums In...Ch. 10 - Prob. 11QAPCh. 10 - Prob. 12QAPCh. 10 - Prob. 13QAPCh. 10 - Prob. 14QAPCh. 10 - Calculating Returns You bought a stock three...Ch. 10 - Prob. 16QAPCh. 10 - Prob. 17QAPCh. 10 - Prob. 18QAPCh. 10 - Prob. 19QAPCh. 10 - Prob. 20QAPCh. 10 - Prob. 21QAPCh. 10 - Prob. 22QAPCh. 10 - Prob. 23QAPCh. 10 - Using Return Distributions Suppose the returns on...Ch. 10 - Prob. 25QAPCh. 10 - Prob. 26QAPCh. 10 - Using Probability Distributions Suppose the...Ch. 10 - Prob. 28QAPCh. 10 - Prob. 1MCCh. 10 - Prob. 2MCCh. 10 - Assume you decide you should invest at least part...Ch. 10 - Prob. 4MCCh. 10 - Prob. 5MCCh. 10 - What portfolio allocation would you choose? Why?...
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Similar questions
- The rates of return on Cherry Jalopies, Incorporated, stock over the last five years were 16 percent, 11 percent, −1 percent, 7 percent, and 10 percent. Over the same period, the returns on Straw Construction Company’s stock were 16 percent, 22 percent, −1 percent, 5 percent, and 12 percent. What was the arithmetic average return on each stock over this period? Note: Enter your answers as a percent rounded to 1 decimal place.arrow_forwardThe rates of return on Cherry Jalopies, Inc., stock over the last five years were 14 percent, 11 percent, -3 percent, 2 percent, and 6 percent. Over the same period, the returns on Straw Construction Company's stock were 16 percent, 15 percent, -9 percent, 4 percent, and 11 percent. What was the arithmetic average return on each stock over this period? (Enter your answers as a percent rounded to 1 decimal place.) Cherry average return % Straw average return %arrow_forwardA financial advisor claims that a particular share earned a total return of 10% last year. During the year the share price rose $30 to $35. What dollar amount of dividend did the share pay? AGL shares sold for $25 each last year and their total return during the past year was 20%. AGL has been paying $1.50 dividend every year. What would the shares be sold today?arrow_forward
- Last year, Rec Room Sports reported earnings per share of $8.50 when its stock price was $212.50.This year, its earnings increased by 20 percent. If the P/E ratio remains constant, what is likely tobe the price of the stock? Explainarrow_forwardLast year, Big W Company reported earnings per share of $3.50 when its stock was selling for $87.50. If its earnings this year increase by 10 percent and the P/E ratio remains constant, what will be the price of its stock? (Do not round intermediate calculations. Round your final answer to 2 decimal places.) Stock Pricearrow_forwardSouthern Markets recently paid an annual dividend of $2.77 on its common stock. This dividend increases at an average rate of 4.4 percent per year. The stock is currently selling for $38.67 a share. What is the market rate of return?arrow_forward
- The rates of return on Cherry Jalopies, Inc., stock over the last five years were 21 percent, 11 percent, −10 percent, 6 percent, and 11 percent. Over the same period, Straw Construction Company’s stock returns were 16 percent, 14 percent, −3 percent, 4 percent, and 16 percent. What was the arithmetic average return on each stock over this period?arrow_forward(Calculating rates of return) The common stock of Placo Enterprises had a market price of $10.38 on the day you purchased it just one year ago. During the past year the stock had paid a dividend of $0.74 and closed at a price of $11.57. What rate of return did you earn on your investment in Placo's stock? The rate of return you earned on your investment in Placo's stock is%. (Round to two decimal places.)arrow_forwardIf you look at stock prices over any year, you will find a high and low stock price for the year. Instead of a single benchmark PE ratio, we now have a high and low PE ratio for each year. We can use these ratios to calculate a high and a low stock price for the next year. Suppose we have the following information on a particular company over the past four years: Year 1 Year 2 Year 3 Year 4 High price $ 99.70 $ 123.30 $ 132.70 $ 149.33 Low price 74.53 90.64 71.32 117.85 EPS 8.98 10.73 11.81 13.20 Earnings are projected to grow at 9 percent over the next year. a. What is your high target stock price over the next year? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What is your low target stock price over the next year? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)arrow_forward
- Wayne, Inc.'s outstanding common stock is currently selling in the market for $54. Dividends of $3.16 per share were paid last year, return on equity is 35 percent, and its retention rate is 26 percent. a. What is the value of the stock to you, given a required rate of return of 17 percent? b. Should you purchase this stock?arrow_forward(please correct answer this question) Lamonica Motors just reported earnings per share of $2.00. The stock has a price earnings ratio of 40, so the stocks current price is $80 per share. Analysts expect that one year from now the company will have an EPS of $2.40, and it will pay its first dividend of $1.00 per share. The stock has a required return of 10 percent. What price earnings ratio must the stock have one year from now so that investors realize their expected return?arrow_forwardThe table given below reports last five years data on annual rates of return (HPYS) on two stocks Year Stock A (%) Stock B (%) 1 16 -10 24 40 30 10 5 -20 20 1. Compute the arithmetic mean of the annual rates of return for both stocks. Which stock is preferable using this measurearrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Essentials Of InvestmentsFinanceISBN:9781260013924Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.Publisher:Mcgraw-hill Education,
Foundations Of FinanceFinanceISBN:9780134897264Author:KEOWN, Arthur J., Martin, John D., PETTY, J. WilliamPublisher:Pearson,
Fundamentals of Financial Management (MindTap Cou...FinanceISBN:9781337395250Author:Eugene F. Brigham, Joel F. HoustonPublisher:Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i...FinanceISBN:9780077861759Author:Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan ProfessorPublisher:McGraw-Hill Education
Essentials Of Investments
Finance
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:9780134897264
Author:KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:Pearson,
Fundamentals of Financial Management (MindTap Cou...
Finance
ISBN:9781337395250
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i...
Finance
ISBN:9780077861759
Author:Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:McGraw-Hill Education
Dividend disocunt model (DDM); Author: Edspira;https://www.youtube.com/watch?v=TlH3_iOHX3s;License: Standard YouTube License, CC-BY