CP

(^0) g s30% (^1) 30% (^2) 30% (^3) g n8% 4 D 1 1.4950 D 2 1.9435 D 3 2.5266 D 4 2.7287 1.3183 13.4% 1.5113 13.4% Pˆ 3 50. ...

share is $7.70 in 2003. The average price per share to earnings per share (P/E) ratio for similar publicly traded companies is 1 ...

The investor can calculate Stock i’s expected rate of returnas follows: ˆri D P 0 1 
g  $ $ 3 3 0 
5% 15%. This value is ...

Stock Market Equilibrium 207 Changes in Equilibrium Stock Prices Stock prices are not constant—they undergo violent changes at t ...

208 CHAPTER 5 Stocks and Their Valuation As this example illustrates, even small changes in the size or riskiness of expected fu ...

would give us no useful clues as to what it will do today or tomorrow. People who be- lieve that weak-form efficiency exists als ...

210 CHAPTER 5 Stocks and Their Valuation mean that new developments could not cause a stock’s price to soar or to plummet, but i ...

Actual Stock Prices and Returns 211 down.^18 We know from theory that expected returns, as estimated by a marginal investor, are ...

always succeed. In subsequent chapters, we will examine the actions that managers can take to increase the odds of their firms d ...

Actual Stock Prices and Returns 213 FIGURE 5-7 2001 Performance of the Dow Jones Global Stock Indexes Source:“World Markets Stum ...

214 CHAPTER 5 Stocks and Their Valuation Stock Market Reporting Up until a couple of years ago, the best source of stock quotati ...

row also reports a dividend yield of 1.56 percent, which is the dividend divided by the stock price. The third row reports the r ...

216 CHAPTER 5 Stocks and Their Valuation Preferred Stock Preferred stock is a hybrid—it is similar to bonds in some respects and ...

Summary Corporate decisions should be analyzed in terms of how alternative courses of action are likely to affect a firm’s value ...

218 CHAPTER 5 Stocks and Their Valuation
The horizon (terminal) dateis the date when individual dividend forecasts are no long ...

Problems 219 Self-Test Problems (Solutions Appear in Appendix A) Ewald Company’s current stock price is $36, and its last divide ...

220 CHAPTER 5 Stocks and Their Valuation The beta coefficient for Stock C is bC0.4, whereas that for Stock D is bD0.5. (Stock ...

Investors require a 15 percent rate of return on Levine Company’s stock (rs15%). a.What will be Levine’s stock value if the pre ...

222 CHAPTER 5 Stocks and Their Valuation Robert Balik and Carol Kiefer are senior vice-presidents of the Mutual of Chicago Insur ...

Selected Additional References and Cases 223 Selected Additional References and Cases Many investment textbooks cover stock valu ...