Questions from Financial Markets


Q: Gordon & Co.’s stock has just paid its annual dividend

Gordon & Co.’s stock has just paid its annual dividend of $1.10 per share. Analysts believe that Gordon will maintain its historic dividend growth rate of 3%. If the required return is 8%, what is the...

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Q: Macro Systems just paid an annual dividend of $0.32

Macro Systems just paid an annual dividend of $0.32 per share. Its dividend is expected to double for the next four years (D1 through D4), after which it will grow at a more modest pace of 1% per year...

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Q: Nat-T-Cat Industries just went public. As a

Nat-T-Cat Industries just went public. As a growing firm, it is not expected to pay a dividend for the first five years. After that, investors expect Nat-T-Cat to pay an annual dividend of $1.00 per s...

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Q: Analysts are projecting that CB Railways will have earnings per share of

Analysts are projecting that CB Railways will have earnings per share of $3.90. If the average industry PE ratio is about 25, what is the current price of CB Railways?

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Q: Suppose Microsoft, Inc., reports earnings per share of around $

Suppose Microsoft, Inc., reports earnings per share of around $0.75. If Microsoft is in an industry with a PE ratio ranging from 30 to 40, what is a reasonable price range for Microsoft?

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Q: An index had an average (geometric) mean return over 20

An index had an average (geometric) mean return over 20 years of 3.8861%. If the beginning index value was 100, what was the final index value after 20 years?

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Q: Compute the price of a share of stock that pays a $

Compute the price of a share of stock that pays a $1 per year dividend and that you expect to be able to sell in one year for $20, assuming you require a 15% return.

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Q: The projected earnings per share for Risky Ventures, Inc., is

The projected earnings per share for Risky Ventures, Inc., is $3.50. The average PE ratio for the industry composed of Risky Ventures’ closest competitors is 21. After careful analysis, you decide tha...

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Q: If the investment bankers retained $1.26 per share as

If the investment bankers retained $1.26 per share as fees, what were the net proceeds to eBay? What was the market capitalization of the new shares of eBay?

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Q: Some economists suspect that one of the reasons that economies in developing

Some economists suspect that one of the reasons that economies in developing countries grow so slowly is that they do not have well-developed financial markets. Does this argument make sense?

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