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Paul Pigeon is a day trader. He is interested in the common stock of Captain Computers Limited. The following data are available for the company:
- Paul Pigeon is a day trader. He is interested in the common stock of Captain Computers Limited. The following data are available for the company:
| 2014 | 2015 | 2016 |
Dividends paid per share* | $4 | $3 | $2.50 |
Dividend yield ratio | 5.5% | 5.5% | 5.5% |
Dividend payout ratio | 40% | 40% | 40% |
Return on total assets | 10% | 12% | 8% |
Return on common stockholders equity | 8% | 14.5% | 9% |
*There were no changes in common stock outstanding over the three-year period.
Required: Paul would like answers to the following questions:
- (2 marks) Is the market price of the companys stock going up or down?
- (3 marks) Is the company employing financial leverage to the advantage of the common stockholders?
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