Xiao and Shiao Jing-jian, newlyweds from Laramie, Wyoming, have decided to begin investing for the future. Xiao is a 7-Eleven store manager, and Shiao is a high-school math teacher. The couple intends to take $2,500 out of their savings for investment purposes and then continue to invest an additional $200 to $400 per month. Both have a moderate investment philosophy and seek some cash dividends as well as price appreciation. Calculate the five-year return on the investment choices in the table below. Current price $28.50 $39.60 Current earnings per share (EPS) $1.90 $2.20 Current quarterly cash dividend $0.16 $0.20 Current P/E ratio 15 18 Projected earnings annual growth rate 25 % 25 % Projected cash dividend growth rate 10 % 10 % (Hint: When making your calculations you should assume at the end of the first year. At the end of the first year the EPS for Running Paws will be $2.38 with a dividend of $0.70, and the EPS for Eagle Packaging will be $2.75 with a projected dividend of $0.88.) 1. Using the appropriate P/E ratios, what are the estimated market prices of the Running Paws and Eagle Packaging stocks after five years? Do not round intermediate calculations. Round your answers to the nearest cent. Running Paws Estimated market price $
Xiao and Shiao Jing-jian, newlyweds from Laramie, Wyoming, have decided to begin investing for the future. Xiao is a 7-Eleven store manager, and Shiao is a high-school math teacher. The couple intends to take $2,500 out of their savings for investment purposes and then continue to invest an additional $200 to $400 per month. Both have a moderate investment philosophy and seek some cash dividends as well as price appreciation. Calculate the five-year return on the investment choices in the table below. Current price $28.50 $39.60 Current earnings per share (EPS) $1.90 $2.20 Current quarterly cash dividend $0.16 $0.20 Current P/E ratio 15 18 Projected earnings annual growth rate 25 % 25 % Projected cash dividend growth rate 10 % 10 % (Hint: When making your calculations you should assume at the end of the first year. At the end of the first year the EPS for Running Paws will be $2.38 with a dividend of $0.70, and the EPS for Eagle Packaging will be $2.75 with a projected dividend of $0.88.) 1. Using the appropriate P/E ratios, what are the estimated market prices of the Running Paws and Eagle Packaging stocks after five years? Do not round intermediate calculations. Round your answers to the nearest cent. Running Paws Estimated market price $
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Xiao and Shiao Jing-jian, newlyweds from Laramie, Wyoming, have decided to begin investing for the future. Xiao is a 7-Eleven store manager, and Shiao is a high-school math teacher. The couple intends to take $2,500 out of their savings for investment purposes and then continue to invest an additional $200 to $400 per month. Both have a moderate investment philosophy and seek some cash dividends as well as price appreciation.
Calculate the five-year
| Current price | $28.50 | $39.60 | ||
| Current earnings per share (EPS) | $1.90 | $2.20 | ||
| Current quarterly cash dividend | $0.16 | $0.20 | ||
| Current P/E ratio | 15 | 18 | ||
| Projected earnings annual growth rate | 25 | % | 25 | % |
| Projected cash |
10 | % | 10 | % |
(Hint: When making your calculations you should assume at the end of the first year. At the end of the first year the EPS for Running Paws will be $2.38 with a dividend of $0.70, and the EPS for Eagle Packaging will be $2.75 with a projected dividend of $0.88.)
1. Using the appropriate P/E ratios, what are the estimated market prices of the Running Paws and Eagle Packaging stocks after five years? Do not round intermediate calculations. Round your answers to the nearest cent.
| Running Paws | ||
| Estimated market price | $ |
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