AN INVESTMENT SITUATION MINI-CASE Lucas Little has been asked by his client to review the financial statements of Stuff Stores Company. Mr. Little's client is considering making a substantial purchase of Stuff Stores stock. Before doing so, the client would like to know a bit more about the financial stability of the company. The information in Table VI.6 should be used to conduct a basic analysis of Stuff Stores' financial situation. Table VI.6 Annual Financial Data for Stuff Stores Company ($ millions) Financial Attribute Market capitalization Year 1 200,000.5 Year 2 212,234.0 Total sales 139,208.0 Net income (earnings) 4,430.0 166,809.0 5,377.0 Current 249,926.5 193,295.0 6,295.0 Dividends per share .16 .20 .24 Shares outstanding 4,474.8 4,443.8 4,464.5 Total assets 64,654.0 70,349.0 78,130.0 Debt 16,891.0 18,712.0 18,824.0 Shareholder's equity 19,136.0 24,216.0 31,343.0 Cash flow 7,580.0 8,194.0 9,604.0 Other relevant data include: Beta for Stuff Stores stock: .85 Standard deviation for Stuff Stores stock: 14.5% Average return for Stuff Stores stock: 10.5% 781 782 Case Approach to Financial Planning Risk-free rate of return: 4.0% Return on the market: 9.0% Information on similar stocks is shown in Table VI.7. Table VI.7 Data for Similar Stocks Company Wigwam Stores, Inc. Maryland Markets Pacific Mercantile, Inc. Stock Beta Stock Standard Deviation Average Stock Return .90 15.5% 8.0% .80 12.0% 9.0% .89 15.0% 11.0% Please use this information to answer the following questions: