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Check the the attached file please in order to answer. 3. After reading this chapter, it isn't surprising that you're becoming an invest ment wizard.

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Check the the attached file please in order to answer.

image text in transcribed 3. After reading this chapter, it isn't surprising that you're becoming an invest ment wizard. With your newfound expertise, you purchase 100 shares of KSU Corporation for $37 per share. Over the next 12 months assume the price goes up to $45 per share and you receive a qualified dividend of $0.50 per share. What would be your total return on your KSU Corporation investment? Assuming you continue to hold the stock, calculate your aftertax return. How is your realized aftertax return different if you se the stock? In both cases, assume you are in the 25 percent federal marginal tax bracket and 15 percent longterm capital gains and qualified dividends tax bracket and there is no state income tax on investment income. 7. Arianna just made a fantastic investment: She purchased 400 shares in Great Gains Corporation for $21.50 per share. Yesterday the stock closed at $56.50 per share. In order to lock in her gains, she has decided to employ a stoploss order Assuming she sets the order at $56, what is likely to happen? Why might this not be a wise decision? At what price would you recommend setting the stoploss Why? 9. Assume you just purchased 250 of Home Depot at $40 per share and 50 percent of this was purchased on the margin." Fill in the blanks to determine your contribution to this transaction: Total cost Amount borrowed Contribution What would happen to your investment if the price of Home Depot stock rose to $50 per share (ignoring any possible dividends)? Total value Loan Margin What was your profit? What would happen to your investment if the price of Home Depot stock fell to S30 per share (ignoring any possible dividends)? Total value Loan Margin What was your loss? 2.The Haley Corporation has just announced yearend results as follows: Value of company assets $12,500,000 Value of company liabilities $6,500,000 Net income $1,600,000 Common stock dividends $250,000 Preferred stock dividins $400,000 Number of shares of common stock outstanding 1,000,000 Closing price of Haley Corporation's stock $45.00 per share a. Calculate the book value per share. b. Calculate earnings per share c. Calculate Haley Corporation's dividend yield. d. Calculate the markettobook ratio. 5. An investor is considering purchasing one of the following three stocks. Stock X has a market capitalization of $7 billion, pays a relatively high dividend with little increase in earnings, and has a P/E ratio of 11. Stock Y has a market capitalization of $62 billion but does not currently pay a dividend. Stock Y has a PE ratio of 39. Stock Z, a housing industry company, has a market capitalization of $800 million and a P/E of 18 a. Classify these stocks according to their market capitalizations. b. Which of the three would you classify as a growth stock? Why? c. Which stock would be most appropriate for an aggressive investor? d. Which stock would be most appropriate for someone seeking a combination of safety and earnings

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