Question 4

Citi-food recently reported net profits after taxes of $17 million. It has 2.5 million shares of common stock outstanding. The companys stock currently trades at $60 per share.

a. Compute the stocks earning per share (EPS) and price-earnings (P/E) ratio. Show your workings.

b. Provided that beta for the stock market in general is 1.0 and the beta for Citi-food is 0.8. What is the expected change in value for the Citi-food stock if the stock market decreases in value by 10 percent?

c. Five years ago, Ben purchased 500 shares of Citi-food. At that time, each share of Citi-food was selling for $55. He also paid $100 commission when the shares were purchase. Now, five years later, he has decided its time to sell his investment. Citi-foods share price when sold is current price of $60. In addition, he paid a $100 commission to sell his shares. He also received total dividends of $2 per share over the five-year investment period. Calculate the total return and annualized holding yield for Bens investment. Show your workings.