In the most recent year, two different companies generated the same earnings per share. The stocks of these two companies should trade at the same price. True False
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- Assume that company A is similar in terms of industry and other characteristics to firms B, C, and D. If you are using the average P/E ratio of the comparable firms, what should the price of Stock A be if it's expected earnings are $2.25 per share? Stock Stock B Stock C Stock D $18.93 $18.98 $60.77 $60.95 Price per share $37.22 $56.92 $421.34 Earnings per share $2.05 $2.96 $1.09 AVERAGE P/E RatioThe ratio of the market price per share of common stock on a specific date to the annual earnings per share is referred to as the price-earnings ratio. Group of answer choices True FalseUsing the information in the table below, 1.Calculate the Price Earnings Ratio for both stocks. Share Price Per Share Stock X ($) 25 Earnings Per Share 2.00 Stock Y ($) 20 0.67 2. Interpret the results obtained in part above, by highlighting the implications for a firm of having a low P/E or a high P/E.
- Case Study 1: A common measure of the relative value of a company's stock is the price to earnings ratio... A relatively low PE indicates either a relatively undervalued stock or a company expected to have low or even negative future earnings growth, while a relatively high PE indicates either an over-valued stock or a company expected to have robust future earnings growth. Consider the following companies, for which we want to determine the aggregate PE: Company A B с D PE Ratio 22.50 24.20 20.00 60.00 Find the right statistical tool, then state the reason for using that tool.The book value per share is usually a close approximation of the market price per share. is the same as the par value per share. may be useful in determining the trend of a shareholders’ per share equity in a corporation. always falls within the annual range of a company's market value per share.While being in different industries, two companies have the same expected earnings per share and the same standard deviation of expected EPS. As a result, the two businesses would face the same business risk. * Correct O Wrong
- 1. Use of multiples for company valuation requires selecting a set of companies in same economic sector and that have similar growth rates. Comment2. Price/earnings ratio can always be used to obtain estimated price of a share. Comment3. Value of a stock rises with an announcement of an increase in dividends to same extent that it falls with same change in dividend per share. CommentQuestion 2: On November 1, 2021, Mr. Daniel Kim, an individual stockinvestor, pays attention to the news that Dongguk Corp. may report an earnings surprise thanks to the booming demand for natural gas pipe associated with rising shale gas production in the US. In order to make an investment judgement through a price multiple comparison method, Mr. Kim chooses to deploy PER (Price-Earnings Ratio) computed as following: PER per share stock price of Dongguk Corp. November 1, 2021) / expected per share net income for the fiscal year of 2021 For comparison purpose, Mr. Kim selects 5 firms that belong to the same industry as Dongguk Corp. that are also similar in firm size, and calculates the average PER using above formula. As a result, Mr. Kim gets a multiple of 15 for Dongguk Corp, whereas the average multiple of those five firms is 12. Based on this multiple comparison, Mr. Kim concluded that the stock market overprices the shares of Dongguk Corp. and gives up investment in Dongguk Corp.…James Corp. only has common stock outstanding and it had the same number of average common shares outstanding for 20X5 and 20X6. If it earned more net income in 20X5 than it did in 20X6, which of the following statements is true regarding its earning per share (EPS)? Select one: a. EPS for 20X5 and 20X6 vwill be the same. b. EPS for 20X6 will be higher than in 20X5. c. EPS for 20X6 will be lower than in 20X5.
- ASSUME that the one year returns for COMPANY A are still (25%, -15%, 120%, -30%, -45%}. Assume also that you acquired shares in COMPANY B, which has had annual returns over the same period, of: {27; 35%; -10%; 10%; -15%}. What is the correlation between the returns on COMPANY A and COMPANY B shares? Multiple Choice 0.567 - 0.356 0.278 - 0.204 Assume that you own a portfolio comprised of 45% COMPANY A and 55% COMPANY B. What return do you expect to earn next year on this portfolio? Multiple Choice 9.74% 13.58% 10.12% 15.25%What is the Poitrowski score? What are the characteristics of shares that are suitable to be assessed with the Piotrowski framework? 2. Discuss the attractiveness of Treynor Black methodology to an investor in developed market large and medium cap equities. 3. The stock market falls by 33 percent in one day: is this necessarily inconsistent with the market hypothesis? Explain your reasoning 4. New information hits a company share such that the share price rises from 100 pence to 120 pence and then the share price rises gradually over the following 6 months to 150 pence despite any further news. Is this evidence of market efficiency? Explain your reasoning.in Chapter 7 S Ross Company, Westerfield, Incorporated; and Jordan Company announced a new agreement to market their respective products in China on July 18, February 12, and October 7, respectively. Given the information below, calculate the cumulative abnormal return (CAR) for these stocks as a group. Assume all companies have an expected return equal to the market return. Note: A negative value should be indicated by a minus sign. Leave no cells blank - be certain to enter "0" wherever required. Do not round intermediate calculations. Round your answers to 1 decimal place. Date July 12 July 13 July 16 July 17 July 18 July 19 July 20 July 23 July 24 Ross Company Market Return -0.3 0.3 0.4 -0.6 -1.7 -1.0 Days from announcement -4 -3 -2 -1 0 1 2 3 4 -0.9 0.6 0.3 Company Return -0.8 0.4 0.6 -0.2 1.3 -0.4 -1.2 0.4 0.0 Ross -0.5 0.1 0.2 0.4 3.0 0.6 -0.3 -0.2 -0.3 Westerfield, Incorporated Date February 8 February 9 February 10 February 11 February 12 February 15 February 16 February 17…
