Question
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
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
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