1. Discuss what the auditor's report signifies about financial statements.

2. Explain the purpose and implications of a fundamental security analysis.

3. Use the chart below and write the calculations that demonstrate the values requested.

Combining information from the S&P reports and some estimated data, the following calendar-year data, on a per-share basis, are provided:

Year Price

Range

Low High Earnings Dividends Book

Value (D/E)

100(%) Annual

Avg. P/E ROE =

E/Book

TR%

1999 $26.5-$35.3 $4.56 $1.72 $25.98 37.7 7.0 17.6%

2000 28.3-37.0 5.02 1.95 29.15 38.8 6.2 17.3

2001 23.5-34.3 5.14 2.20 32.11 42.8 5.8 16.0

2002 27.8-35.0 4.47 2.20 30.86 7.7

2003 29.0-47.8 5.73 2.30 30.30 6.8

2004 36.6-53.5 6.75 2.40 39.85

2005 6.75 2.60 44.00

a. Calculate the D/E, ROE, and TR for 2002, 2003, and 2004. (Use the average of the low and high prices to calculate TRs.)

b. Show that from 2000 through 2004 the per annum growth rate in dividends was 6.9 percent and for earnings was 8.2 percent.

c. Using the current price of $47, with estimated earnings for 2005 of $6.75, show that the P/E would be evaluated as 6.96.