Part I: Ranking investments by expected returns.

Use the approximate expected return formula or a financial calculator to rank the following investments according to their expected returns. After ranking the investments based on their approximate yield, describe what makes a good investment?

Buy a stock for $30 a share, hold it for 3 years, and then sell it for $60 a share (the stock pays annual dividends of $2 a share).

Buy a security for $40, hold it for 2 years, and then sell it for $100 (current income on this security is zero).

Buy a 1-year, 5 percent note for $1,000 (assume that the note has a $1,000 par value and that it will be held to maturity).

Part II: Calculating key financial ratios.

Selected financial information about Outer Scapes, Inc. is as follows:

Total assets	$20,000,000
Total liabilities	$8,000,000
Total preferred stock	$3,000,000
Total annual preferred stock dividends	$240,000
Net profits after tax	$2,500,000
Number of shares of common stock outstanding	500,000 shares
Current market price of common stock	$50.00 a share
Annual common stock dividends	$2.50 a share

Using the companys financial information, compute the following:

Dividend yield

Book value per share

EPS

P/E ratio