Prof.
Camara/Intro to Finance/Fall_23
1. If on November 26, 2020, The Dow Jones Industrial Average closed at 12,743.40, which was
down 237.44 that day. What was the return (in percent) of the stock market that day?
2. If on November 27, 2020, The Dow Jones Industrial Average closed at 12,958.44, which was up
215.04 that day. What was the return (in percent) of the stock market that day?
3. At your discount brokerage firm, it costs $9.95 per stock trade. How much money do you need
to buy 100 shares of Ralph Lauren (RL), which trades at $85.13?
4. At your full-service brokerage firm, it costs $110 per stock trade. How much money do you
receive after selling 100 shares of Time Warner, Incorporated (TMX), which trades at $22.62?
5. You would like to buy shares of Nokia (NOK). The current bid and ask quotes are $20.13 and
$20.15, respectively. You place a market buy-order for 300 shares that executes at these quoted
prices. How much money did it cost to buy these shares?
6. If a preferred stock from Ecology and Environment, Incorporated (EEI) pays $2.50 in annual
dividends, and the required return on the preferred stock is 5.8 percent, what's the value of the
stock?
7. A firm has current assets that could be sold for their book value of $10 million. The book value
of its fixed assets is $60 million, but they could be sold for $95 million today. The firm has total
debt at a book value of $40 million, but interest rate changes have increased the value of the
debt to a current market value of $50 million. This firm's market-to-book ratio is __________.
8. You are considering acquiring a common share of Sahali Shopping Center Corporation that you
would like to hold for 1 year. You expect to receive both $1.25 in dividends and $35 from the
sale of the share at the end of the year. The maximum price you would pay for a share today is
__________ if you wanted to earn a 12% return.
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Prof. Camara/Intro to Finance/Fall_23
9. The market capitalization rate on the stock of Aberdeen Wholesale Company is 10%. Its
expected ROE is 12%, and its expected EPS is $5. If the firm's plowback ratio is 50%, its P/E ratio
will be __________.
10. If a preferred stock from Pfizer Incorporated (PFE) pays $3.00 in annual dividends, and the
required return on the preferred stock is 7 percent, what's the value of the stock?
11. If a preferred stock from Ecology and Environment, Incorporated (EEI) pays $2.50 in annual
dividends, and the required return on the preferred stock is 5.8 percent, what's the value of the
stock?
$2.50 ÷ 5.8% = $43.10
12. International Business Machines (IBM) has earnings per share of $6.85 and a P/E ratio of
15.19. What is the stock price?
13. Pfizer, Incorporated (PFE) has earnings per share of $2.09 and a P/E ratio of 11.02. What
is the stock price?
14. Financial analysts forecast Best Buy Company (BBY) growth for the future to be 13 percent. Their
recent dividend was $0.49. What is the value of their stock when the required rate of return is
14.13 percent?
15. The Buckle (BKE) recently paid a $0.90 dividend. The dividend is expected to grow at a 19
percent rate. At the current stock price of $43.17, what is the return shareholders are
expecting?
16. Home Depot (HD) recently paid a $0.90 dividend. The dividend is expected to grow at a 17
percent rate. At the current stock price of $33.08, what is the return shareholders are
expecting?
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Prof. Camara/Intro to Finance/Fall_23
