Business, 25.11.2021 06:20 lashondrastokes83

Investment Calculations 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 $4,000 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.
Running Paws Eagle Packaging
Current price $27.00 $60.00
Current earnings per share (EPS) $1.80 $2.50
Current quarterly cash dividend $0.16 $0.17
Current P/E ratio 15 24
Projected earnings annual growth rate 15% 15%
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 $2.07 with a dividend of $0.70, and the EPS for Eagle Packaging will be $2.88 with a projected dividend of $0.75).
a) Using the appropriate P/E ratios, what are the estimated market prices of the Running Paws and Eagle Packaging stocks after five years?
b) Show your calculations in determining the projected price appreciations for the two stocks over the five years.
c) Determine the average annual dividend for each stock, and use these figures in calculating the approximate compound yields for each.
d) Assume that the beta is 2.6 for Running Paws and 2.8 for Eagle Packaging. If the market went up by 17 percent during the year, what would be the likely stock prices for Running Paws and Eagle Packaging?
e) Assume that inflation is approximately 4 percent and the return on high-quality, long-term, corporate bonds is 8 percent. Given the Jing-jians' investment philosophy, explain which investment alternative you would recommend: (1) Running Paws, (2) Eagle Packaging, or (3) a high-quality, long-term corporate bond, or (4) other growth investment. Support your answer by calculating the potential rate of return using the provided information or by using the Garman/Forgue website. The Jing-jians are in the 25 percent marginal tax bracket.

Answers: 1

Show answers

Another question on Business

Business, 22.06.2019 02:50

Seattle bank’s start-up division establishes new branch banks. each branch opens with three tellers. total teller cost per branch is $96,000 per year. the three tellers combined can process up to 90,000 customer transactions per year. if a branch does not attain a volume of at least 60,000 transactions during its first year of operations, it is closed. if the demand for services exceeds 90,000 transactions, an additional teller is hired and the branch is transferred from the start-up division to regular operations. required what is the relevant range of activity for new branch banks

Answers: 2

Answer

Business, 22.06.2019 11:00

While on vacation in las vegas jennifer, who is from utah, wins a progressive jackpot playing cards worth $15,875 at the casino royale. what implication does she encounter when she goes to collect her prize?

Answers: 1

Answer

Business, 22.06.2019 14:20

Cardinal company is considering a project that would require a $2,725,000 investment in equipment with a useful life of five years. at the end of five years, the project would terminate and the equipment would be sold for its salvage value of $400,000. the company’s discount rate is 14%. the project would provide net operating income each year as follows: sales $2,867,000 variable expenses 1,125,000 contribution margin 1,742,000 fixed expenses: advertising, salaries, and other fixed out-of-pocket costs $706,000 depreciation 465,000 total fixed expenses 1,171,000 net operating income $571,000 1. which item(s) in the income statement shown above will not affect cash flows? (you may select more than one answer. single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. any boxes left with a question mark will be automatically graded as incorrect.) (a)sales (b)variable expenses (c) advertising, salaries, and other fixed out-of-pocket costs expenses (d) depreciation expense 2. what are the project’s annual net cash inflows? 3.what is the present value of the project’s annual net cash inflows? (use the appropriate table to determine the discount factor(s) and final answer to the nearest dollar amount.) 4.what is the present value of the equipment’s salvage value at the end of five years? (use the appropriate table to determine the discount factor(s) and final answer to the nearest dollar amount.) 5.what is the project’s net present value? (use the appropriate table to determine the discount factor(s) and final answer to the nearest dollar amount.)

Answers: 2

Answer

Business, 22.06.2019 23:20

You work as the sales manager for a company that sells office supplies to businesses of all sizes. because the profit margins are razor-thin, you need to ensure that you are getting the very best prices on paper, pencils, pens, post-it notes, and other office supplies from the manufacturers. when reviewing the quarterly profit statement, you realize that your costs are higher than they should be, and you trace the higher costs back to an employee who has been lax about getting competitive bids to ensure the lowest prices. when you conduct your research to determine the reason for the higher costs, and take action to bring those costs back down, in which of the key management processes are you taking part?

Answers: 3

Answer

You know the right answer?

Investment Calculations Xiao and Shiao Jing-jian, newlyweds from Laramie, Wyoming, have decided to...

Questions