Question

Stock A has an earnings of $5 per share at year 1. The interest rate is 20%, and the return on equity is 25%. If there is a plow-back of 40%, what is the stock price at year one (P1) ? Select one: a. $15.00 b. $25.00 c. $30.00 d. $33.00 e. none of the above

Stock A has an earnings of $5 per share at year 1. The interest rate is 20%, and the return on equity is 25%. If there is no plow-back, how much is the amount of the earnings or profit kept in the firm for each share of the stock at year one ?

Select one:

a. $3.00

b. $2.00

c. $1.00

d. $0.00

e. none of the above

Stock A has an earnings of $5 per share at year 1. The interest rate is 20%, and the return on equity is 25%. If there is no plow-back and you like to buy stock A now and hold it for two years, what is the expected return for your investment ?

Select one:

a. 10.00%

b. 20.00%

c. 25.00%

d. 40.00%

e. none of the above

A stock paying $5 in annual dividends now (div0 = $5) also sells now for $115 (P0 =$115) and has an expected return of 20%. What might investors expect to pay for the stock one year from now (P1)?

Select one:

a. $132.25

b. $133.00

c. $130.25

d. $118.25

e. None of the above

Answer 1

1)

Hence the correct option is d.$33.00

2)

The amount of the earnings=Earnings per share*Plow back ratio

=$5*40%

=$2

Hence the correct option is b.$2.00

3)

If there is no plow back ratio the expected return for your investment is the return on equity

Hence the correct option is C.25.00%