A P/E ratio is calculated in the middle of the accounting year. For a given share price, the company could use the most recent annualEPS, or it could use the total of the most recent four quarterly EPS numbers. Which of the following statements is not true?Multiple ChoiceThe ratio will be larger if the most recent annual EPS is used when earnings are decreasing.The ratio will be smaller if the EPS for the last four quarters are used when earnings are increasing.The ratio will be smaller if the most recent annual EPS is used when earnings are decreasing.The ratio will be larger if the EPS for the last four quarters are used when earnings are decreasingPrev25 of 50Next i

A P/E ratio is the ratio of market price per share (MPS) to earnings per share (EPS) P/E ratio will…

Answered: A P/E ratio is calculated in the middle…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Given the information below for Seger Corporation, compute the expected share price at the end of 2022 using price ratio analysis. Assume that the historical (arithmetic) average growth rates will remain the same for 2022. Note: Do not round intermediate calculations. Round your answers to 2 decimal places. Year Price EPS CFPS SPS 2016 $ 88.60 2.55 7.47 45.10 Using PE ratio Using P/CF ratio Using P/S ratio 2017 $ 94.50 3.26 8.40 50.10 2018 $ 93.20 4.06 8.83 49.50 Share Price 2019 2020 2021 $90.70 $112.20 $127.60 4.76 10.32 53.00 7.20 11.92 64.20 8.201 13.18 72.20
Suppose that a firm's recent earnings per share and dividend per share are $2.55 and $1.40, respectively. Both are expected to grow at 11 percent. However, the firm's current P/E ratio of 15 seems high for this growth rate. The P/E ratio is expected to fall to 11 within five years. Compute the dividends over the next five years. (Do not round intermediate calculations. Round your answers to 3 decimal places.) Years First year Second year Third year Fourth year Fifth year Dividends
The following spreadsheet contains monthly returns for Cola Co. and Gas Co. for 2013. Using these data, estimate the average monthly return and the volatility for each stock. (Click on the following icon in order to copy its contents into a spreadsheet.) Month January February March April May June July August September October November The average monthly return for Cola Co. is%. (Round to two decimal places.) Cola Co. -7.10% -2.10% -3.80% -4.10% 1.50% 1.20% -21.10% - 14.50% - 28.80% 22.90% -13.40% Gas Co. -8.10% -2.00% -2.60% -5.00% -4.70% -3.20% 6.70% -8.50% - 12.60% 16.50% -6.10%
If you look at stock prices over any year, you will find a high and low stock price for the year. Instead of a single benchmark PE ratio, we now have a high and low PE ratio for each year. We can use these ratios to calculate a high and a low stock price for the next year. Suppose we have the following information on a particular company: Year 1 Year 2 Year 3 Year 4 High $87.93 $100.35 $121.89 $133.60 Low price 69.85 83.19 79.99 110.18 EPS 6.54 8.96 8.62 10.21 Earnings are expected to grow at 5.5 percent over the next year. a. What is the high target stock price over the next year? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What is the low target stock price over the next year? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) a. High target price b. Low target price price
Given the information below for HooYah! Corporation, compute the expected share price at the end of 2022 using price ratio analysis. Assume that the historical (arithmetic) average growth rates will remain the same for 2022. Note: Do not round intermediate calculations. Round your answers to 2 decimal places. Exclude negative annual P/E and P/CFPS ratios from the average PE and average P/CFPS ratio calculations. When computing annual growth rates, use a positive sign on the annual rate of change if the per share value increased in value and use a negative sign on the annual rate of change if the per share value deceased in value. Year Price EPS CFPS SPS 2016 $ 21.00 -5.00 Using PE ratio Using P/CF ratio Using P/S ratio -12.00 18.00 2017 $ 57.50 -4.29 -9.50 26.50 S Answer is not complete. Share Price 110.41 2018 $ 129.00 -1.70 -2.70 24.60 $ 132.55 2019 $ 206.00 -0.45 -0.10 28.10 2020 $ 96.00 0.05 0.33 31.60 2021 $26.50 0.06 0.08 34.95
Murray Motor Company wants you to calculate its cost of common stock. During the next 12 months, the company expects to pay dividends (D1) of $2.50 per share, and the current price of its common stock is $50 per share. The expected growth rate is 8 percent. Compute the cost of retained earnings (Ke). Note: Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places. If a $3 flotation cost is involved, compute the cost of new common stock (Kn). Note: Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.
A company’s comparative statements are given below. Please conduct the following analyses: a. Horizontal analysis (trend analysis) on the income statement b. Vertical analysis (common size financial statement analysis) on the income statement Note: When the dollar change is positive, it indicates that the value increased and therefore the % change should be positive. Therefore, when calculating % change involving a negative baseline value, use the absolute value of the baseline number in the denominator: % change = (new value - original baseline value)/|baseline value|. Otherwise the % change will be inconsistent with the real change. For example:Let's say item A changed from -10 to +10. Item A increased by 20 and thus should give rise to a positive % change. However, % change based on formula using the original value of -10 is -200% = [10-(-10)]/(-10).Let’s look at another example. Assume item B changed from -10…
Given the information below for HooYah! Corporation, compute the expected share price at the end of 2020 using price ratio analysis. Assume that the historical (arithmetic) average growth rates will remain the same for 2020. (Do not round intermediate calculations. Round your answers to 2 decimal places. Exclude negative annual PE and P/CFPS ratios from the average PE and average P/CFPS ratio calculations. When computing annual growth rates, use a positive sign on the annual rate of change if the per share value increased in value and use a negative sign on the annual rate of change if the per share value deceased in value.) Year Price EPS CFPS SPS 2014 $11.00 -7.00 -12.00 8,00 Using PE ratio Using P/CF ratio Using P/S ratio 2015 2016 $47.50 $119.00 -6.29 -9,50 16.50 -1.70 -2.70 19.60 Share Price 2017 $196.00 -.50 10 23.10 2018 $86.00 .07 18 26.60 2019 $16.50 0.06 00 24.95
Given the information below for HooYah! Corporation, compute the expected share price at the end of 2020 using price ratio analysis. Assume that the historical (arithmetic) average growth rates will remain the same for 2020. (Do not round intermediate calculations. Round your answers to 2 decimal places. Exclude negative annual PE and P/CFPS ratios from the average PE and average P/CFPS ratio calculations. When computing annual growth rates, use a positive sign on the annual rate of change if the per share value increased in value and use a negative sign on the annual rate of change if the per share value deceased in value.) 11111) Year 2014 2015 2016 2017 2018 2019 Price $ 20.00 $ 56.50 $ 128.00 $ 205.00 $ 95.00 $ 25.50 EPS -4.00 -3.29 -1.60 -.43 .06 .06 CFPS -11.00 -8.50 -2.60 -.15 .28 .08 SPS 17.00 25.50 24.10 27.60 31.10 33.95 Share Price Using PE ratio Using P/CF ratio Using P/S ratio
If you were an investor considering purchasing the stock of a company and you were concerned about the company's ability to produce income or operating success for a given period of time, which of the following trends would worry you most? O a decreasing inventory turnover ratio an increasing return on common stockholders' equity ratio O a decreasing return on assets ratio an increasing current ratio
Given the information below for HooYah! Corporation, compute the expected share price at the end of 2020 using price ratio analysis. Assume that the historical (arithmetic) average growth rates will remain the same for 2020. (Do not round intermediate calculations. Round your answers to 2 decimal places. Exclude negative annual PE and P/CFPS ratios from the average PE and average P/CFPS ratio calculations. When computing annual growth rates, use a positive sign on the annual rate of change if the per share value increased in value and use a negative sign on the annual rate of change if the per share value deceased in value.) Year 2014 2015 2016 2017 2018 2019 Price $ 20.00 $ 56.50 $ 128.00 $ 205.00 $ 95.00 $ 25.50 EPS -4.00 -3.29 -1.60 -.43 .06 .06 CFPS -11.00 -8.50 -2.60 -.15 .28 .08 SPS 17.00 25.50 24.10 27.60 31.10 33.95 Answer is complete but not entirely correct. Share Price Using PE ratio $ 91.12 Using P/CF ratio $ 54.98 X Using P/S ratio $ 131.06
Given the information below for HooYah! Corporation, compute the expected share price at the end of 2022 using price ratio analysis. Assume that the historical (arithmetic) average growth rates will remain the same for 2022. Note: Do not round intermediate calculations. Round your answers to 2 decimal places. Exclude negative annual P/E and P/CFPS ratios from the average PE and average P/CFPS ratio calculations. When computing annual growth rates, use a positive sign on the annual rate of change if the per share value increased in value and use a negative sign on the annual rate of change if the per share value deceased in value. 18 Year Price EPS CFPS 2016 $ 15.00 -7.00 -16.00 2017 $ 51.50 -6.29 -13.50 2018 $ 123.00 -2.10 2019 $ 200.00 -0.45 -3.10 -0.15 2020 $ 90.00 0.03 0.38 2021 $ 20.50 0.06 0.08 SPS 12.00 20.50 21.60 25.10 28.60 28.95 hai Roo Share Price Using PE ratio Using P/CF ratio Using P/S ratio ogyp

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