TEXT BOOK: JONES, CP (2010) INVESTMENTS , ANALYSIS AND MANAGEMENT(11THED.)
HOBOKEN, NJ:JOHN WILEY & SONS, INC.
DIRECTIONS: ANSWER THE FOLLOWING QUESTIONS, SHOW YOUR WORK, INCLUDING ALL FORMULAS USED, IF THE QUESTION REQUIRES CALCULATIONS. USE COMPLETE SENTENCES WHEN REPORTING YOUR ANSWERS.
1. What is meant by ” intrinsic values:? How is it determined ?(20point)
2. The Hall Dental Supply company sells at $32 pere share, and RXXXXX XXXXX, the CEO of this well-known Research Triangle firm, estimates the latest 12-month earnings are $4 per share with a dividend payout of 50%. Halls’s earnings estimates are very accurate.
A. What is Hall’s current P/E ratio-10points
b. if an investor expects earnings to grow by 10% a year, what is the projected price for next year if the P/E ratio remains unchanged?-20points
c. Ray Parker, President of Hall Dental Supply Company, analyzes the data and estimates tha the payout ratio will remain the same.
Assume the expected growth rate of dividend is 10% , would this stock be a good buy? why or why not? (20points)
d. if interest rate are expected to decline, what is the likely effect on Hall’s P/E ratio?-10 Points
3. What impact does the market have on well-diversified portolios? What does this suggest about the performance of mutual funds?-10 points
4. What is the relationship between fundamental analysis and intrinsic value?-10 points