PRIN.OF CORPORATE FINANCE
13th Edition
ISBN: 9781260013900
Author: BREALEY
Publisher: RENT MCG
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Textbook Question
Chapter 4, Problem 4PS
Stock quotes Go to finance.yahoo.com and get trading quotes for IBM.
- a. What is the latest IBM stock price and market cap?
- b. What is IBM’s dividend payment and dividend yield?
- c. What is IBM’s trailing P/E ratio?
- d. Calculate IBM’s forward P/E ratio using the EPS
forecasted by analysts for the next year. - e. What is IBM’s price–book (P/B) ratio?
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Students have asked these similar questions
Using the data in the table:,
a. What was the average annual return of Microsoft stock from 2005-2017?
b. What was the annual volatility for Microsoft stock from 2005-2017?
a. What was the average annual return of Microsoft stock from 2005-2017?
The average annual return is %. (Round to two decimal places.)
Data table
(Click on the following icon in order to copy its contents into a spreadsheet.)
Realized Return for the S&P 500, Microsoft, and Treasury Bills, 2005-2017
S&P 500
Realized
Return
Microsoft
Realized
Return
Dividends
Paid*
Year End
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
S&P 500
Index
1211.92
1248.29
3.00%
4.80%
1418.30
1468.36
903.25
4.70%
1.50%
0.10%
0.10%
1115.10
1257.64
1257.61
0.00%
1426.19
0.10%
1848.36
0.00%
0.00%
2058.90
2043.94
0.00%
0.20%
2238.83
2673.61
0.80%
*Total dividends paid by the 500 stocks in the portfolio, based on the number of shares of
each stock in the index, adjusted until the end of the year, assuming they were…
Question 2.
Consider the data in the table bolow, which shows the relevant data for the stocks of six firms: GE,
Apple, Bank of America, Exxon, Pfizer, and Home Depot. Rf is the risk-free rate and Ap:/p;is the
growth rate of the stock price. Additionally, the table has the actual market price of each stock (PM)
as of September 2016. Use the stock price arbitrage equation to calculate the no-arbitrage price of
each stock. Given your answer, should you buy the stock or put the money into a safe asset?
Firm
Dividend
RF
Ap:/ps
рм
GE
0.38
4.2
3.18
32.1
Apple
2.03
4.2
2.04
106.1
Bank of America
0.2
4.2
3.4
15.9
Еxxon
0.75
4.2
3
87.5
Pfizer
1.12
4.2
1.5
35.7
Home Depot
1.78
4.2
3.01
135
Source: Morningstar, Sept. 1, 2016.
If 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 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.
Year 1
$ 62.18
40.30
2.35
a. High target price
b. Low target price
Year 2
$67.29
43.18
2.58
Year 3-
$74.18
39.27
2.73
Year 4
$78.27
46.21
High price
Low price
EPS
Earnings are expected to grow at 9 percent over the next year.
6. What is the high target stock price in one year?
32.16.
Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g..
b. What is the low target stock price in one year?
Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.
2.890
Chapter 4 Solutions
PRIN.OF CORPORATE FINANCE
Ch. 4 - Stock markets True or false? a. The bid price is...Ch. 4 - Stock quotes a. I would like to sell 1000 shares...Ch. 4 - Stock quotes Here is a small part of the order...Ch. 4 - Stock quotes Go to finance.yahoo.com and get...Ch. 4 - Valuation by comparables Look up P/E and P/B...Ch. 4 - Dividend discount model True or false? a. All...Ch. 4 - Dividend discount model Respond briefly to the...Ch. 4 - Dividend discount model Company X is expected to...Ch. 4 - Dividend discount model Company Y does not plow...Ch. 4 - Constant-growth DCF model Company Zs earnings and...
Ch. 4 - Prob. 11PSCh. 4 - Constant-growth DCF model Pharmecology just paid...Ch. 4 - Prob. 13PSCh. 4 - Cost of equity capital Under what conditions does...Ch. 4 - Cost of equity capital Each of the following...Ch. 4 - Two-stage DCF model Company Z-prime is like Z in...Ch. 4 - Two-stage DCF model Consider the following three...Ch. 4 - Two-stage DCF model Company Qs current return on...Ch. 4 - Two-stage DCF model Compost Science Inc. (CSI) is...Ch. 4 - Growth opportunities If company Z (see Problem 10)...Ch. 4 - Growth opportunities Alpha Corps earnings and...Ch. 4 - Prob. 24PSCh. 4 - Prob. 25PSCh. 4 - Prob. 26PSCh. 4 - Horizon value Suppose the horizon date is set at a...Ch. 4 - Valuing a business Permian Partners (PP) produces...Ch. 4 - Valuing a business Construct a new version of...Ch. 4 - Valuing a business Mexican Motors market cap is...Ch. 4 - Valuing a business Phoenix Corp. faltered in the...Ch. 4 - Constant-growth DCF formula The constant-growth...Ch. 4 - DCF valuation Portfolio managers are frequently...Ch. 4 - Valuing a business Construct a new version of...
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